IRS is Hiring LOTS of tax individuals
The U.S. Internal Revenue Service (IRS) plans to hire nearly 20,000 new employees and deploy new technology over the next two years as it ramps up an $80 billion investment plan to improve tax enforcement and customer service, it said on Thursday.
The tax agency, in its long-awaited Strategic Operating Plan, said it will obligate about $8.64 billion of the new funding during the 2023 and 2024 fiscal years, and that 7,239 of the new hires during those years will be enforcement staff.
Kevin O’Leary, a public figure and investor on “Shark Tank,” has shared some valuable insights for those who are worried about the Internal Revenue Service’s (IRS) new expansion plans. The government agency has recently announced that the additional resources will be utilized to increase audits for those earning over $500,000.
According to O’Leary, small business owners who are concerned about potential audits should not be anxious. In a recent conversation with Fox Business, the investor informed viewers that he and the CEOs he collaborates with “had a bit of a town hall” to discuss the next steps and stated that “Okay, this is a reality. What are we going to do about it? We’ve got to start preparing our taxes and our payroll records.”
What does this mean for you?
More companies including SMBs are at risk for an audit. Small businesses are growing, scrambling, and trying to keep things open, and you fall behind on keeping your records clean. This tells you that now you’ve got to have crystal clear records. You have to invest in keeping yourself compliant. Because when you do and if you get audited, the best thing is to have the data.
Underpayment of Taxes and Poor Record Keeping
The most common tax problems vexing small business owners are the underpayment of taxes and poor record keeping.
The business owner collects sales tax from customers but neglects to pass it along to the state, thereby underpaying the sales and use tax obligation. Collected sales tax is meant to pay for that; if it does not get paid through the business, the CDTFA holds certain “responsible persons” liable for the sales and use tax debt. Responsible persons can include the business owner(s), employees and anyone else involved in business operations.
Small business owners may also underpay their personal income tax. Maybe they think estimated quarterly tax is optional. It is not. Estimated tax payments are mandatory, and if you do not pay on time and in full, you will be subject to penalties and interest on the unpaid amount.
How can you prepare?
1. Know your deadlines
Tax filing deadlines vary depending on business entity type. This year, for example, the deadline for corporations was April 15, while sole proprietors have until May 17 to file.
Other tax deadlines include estimated tax payments, which are due quarterly, and payroll taxes, which are deposited monthly or semiweekly.
2. Gather your financial records
Pull together your financial records before starting your taxes. That includes payroll documents, income statements, depreciation schedules, bank and credit card statements, and receipts for large purchases. You’ll need this information to complete your business tax returns.
3. Complete the proper tax forms
Prepare the proper tax forms to report any business income or loss, legitimate deductions and estimated taxes. These forms will be filed along with or in addition to your personal 1040.
You may also need to file specific forms for depreciation, home-based businesses, self-employment taxes and estimated taxes.
4. Lean on a tax professional
If your business model is straightforward and your records are organized, you may not need the help of a tax professional.
But if you’re just starting out or your business has changed, they can help you identify deductions, determine the best structure for your business and head off future tax headaches.
Most importantly, they can make sure you don’t pay too much or too little.
Good record keeping can help you reduce your risk to being flagged for an IRS audit.
Regularly check on a quarterly or monthly basis to ensure you continue to maintain good records.
If you don’t have the time or resources, make sure to partner with a payroll company that can help and may do your tax filings for you. They can help you remain in full compliance with the frequently changing state and federal laws. Ensure 100% payroll accuracy by syncing it with the rest of your HR and benefits. Also it is important that your partner is there to help you should you get flagged for a tax audit. Make sure you have a payroll provider that will be responsive should you need any assistance.
Tax season is considered for many a very stressful time. For those that are not the most organized it can be even more critical as it may increase your risks for mistakes and could flag your business for a tax audit. By partnering with a payroll company that manages your tax filings for you, you can reduce some of the complexity and time consuming efforts involved in keeping up with your taxes. However, there is no need to panic as the IRS has programs to support small businesses, and they are not the enemy.
Get in touch with us for an expert-led demo to know more about UZIO payroll services.