Self-employed taxpayers generally have more control over their tax situation. You can make the following decisions related to your taxes:
- What business expense deductions to claim
- What business entity to use, such as a partnership or C-corporation
- How much to pay in estimated taxes
- Whether to set up a business retirement account
- What tax-advantaged benefits you provide to employees
You also have an increased risk of tax problems when you file a Schedule C. You have a greater chance of being audited and more ways to fall behind on your tax payments.
Reduce Your Audit Risk
If you are claiming a lot of business expenses deductions, you may want to work with a professional tax preparer. The rules for deducting business expenses can be complicated, as some expenses are deductible, some must be depreciated, and some aren’t deductible at all.
You should also have a reliable bookkeeping system. When it’s time to do your taxes, things go much more smoothly if you have all of your records in one place.
Keeping accurate records also helps you reduce the risk of an IRS audit because you’ll know your deductions are correct.
Stay Current on Tax Payments
Entrepreneurs need to pay their own self-employment taxes and federal and state income taxes. This will typically require making quarterly estimated tax payments.
If you have employees, you also need to collect and submit payroll taxes. There are steep penalties for late payroll tax deposits. If you willfully fail to submit payroll taxes, you could even face the trust fund recovery penalty, which is 100% of the amount of unpaid taxes.
If you fall behind on your tax payments, talk to a tax attorney about your repayment options to avoid an ever-increasing balance owed to the IRS.
File Your Taxes
When you have a complicated tax return and a business to run, it’s easy to put off doing your taxes. If you don’t meet the filing deadline, you could face late-payment penalties, the failure to file penalty, and interest on your past-due taxes.
If you need to request a filing extension, consider submitting a payment at the same time. This will reduce the amount you owe and the amount you pay in penalties and interest.
You can several repayment options if you’ve accumulated some IRS or state tax debt. Contact a tax attorney to determine your best tax resolution option.
The Gartzman Law Firm can help you with back taxes and other IRS tax problems. Use our contact form to request a consultation with an Atlanta tax resolution attorney.