There is a cliché saying that goes something like, ‘things get better with age’. While this adage certainly applies to say, wine and cheese, it is certainly not applicable in every scenario. Tax season, for example, is generally a time of the year that becomes more and more of a burden as one ages and acquires more taxable assets and intricacies within their lives. Fortunately, we here at Accounting Solutions Ltd., are in the business of easing stress off our client’s shoulders, and we are more than happy to address any questions and concerns that may face our customers when tax season rolls around.
Regardless of your age or the complexity of your financial situation, there are certain things that we believe that everyone should know around this time of year. Tax is an intricate topic, and there are many misconceptions that float around it. Hopefully, after reading this article, you will have a better understanding of some of the pitfalls that have been plaguing misinformed taxpayers for years. Without further ado, here are our three common tax myths (finally busted).
Why File Returns?
As astounding as it may sound, we have encountered a shocking number of individuals over the years who have somehow reached the false conclusion that, if they do not owe taxes, they should not have to file returns. While this may seem logically sound, the IRS does not view it in the same light, as, chances are, you still do owe some sum of money.
The important thing here is to understand why people think this in the first place. Perhaps they are self-employed (in which case there is an additional 15% tax that has to be added to the income that they must declare), or they own a S Corporation or partnership business (not subject to income taxes, but chances are high that they owe for something else). Regardless the underlying backstory, everyone does technically have to file, or else risk getting financially penalized by the IRS. For example the current penalty for not filing is $195.00 per month per partner if you are part of one of the aforementioned partnerships. This sort of dough adds up quickly.
Long story short – file a return, regardless if you feel that you do not have to, because, chances are you are missing something important that the IRS is definitely going to catch.
I Own A Corporation/LLC, Why Should I Be Concerned About Payroll Taxes?
One of the biggest advantages to owning an incorporated business revolves around the lack of liability involved – one is essentially personally disconnected from the debts and issues of the company itself. This makes it easy to falsely presume that you do not have to be involved in paying payroll taxes as well. Unfortunately, this is incorrect, as any individual who acts as the owner of a corporation or LLC is personally responsible for providing tax information relating to payroll. As with the other two items on this list, the penalties that the IRS can send your way for failing to comply can be quite severe.
Can I Just Declare Bankruptcy?
As unfortunate as it sounds, many small business owners will choose to declare a state of bankruptcy rather than pay off their returns and attempt to reconfigure their resources. For some, this is the only viable solution to their financial quandary. What many fail to realize is that these debts to the IRS are still technically due until at least three years after the initial return was to be filed. For example, the tax return for 2015’s income taxes are meant to be submitted by April 15, 2016 at the very latest. These charges are immovable at any time prior to the ower filing bankruptcy on or before April 15, 2019. In addition, an IRS audit can extend this time period by another 240 days, digging the hole of potential debt and penalties even deeper. Sure, bankruptcy may seem like the only option, but be advised that it can open another pandora’s box of debt.
Tax season certainly does not get any easier, particularly as one engages in more complex financial ventures. We here at Accounting Solutions Ltd understand this, and are here to help. If you are about to file your taxes (or not file them at all), and feel that something may be amiss, then do not hesitate to reach out, our CPAs are ready to provide the advice that will have you leaving tax season without the IRS knocking on your door.