When you have serious tax issues, you need someone who knows tax law


How to Avoid Small Business Tax Problems

Tax problems are a common issue for small business owners. While you’re spending so much effort trying to grow your business and increase profits, it’s easy to fall behind on tax payments, payroll taxes, or filing your tax returns.

Watch out for these common tax issues faced by small businesses.

Payroll Tax Problems

If you have employees, you need to collect payroll taxes and submit them to the IRS. Payroll taxes are the amounts withheld from your employees’ paychecks for Social Security and Medicare taxes.

You need to deposit these amounts according to a specific schedule which is usually monthly or biweekly. You may also need to file Form 941, Employer’s Quarterly Federal Tax Return.

A failure to deposit payroll taxes can result in penalties of anywhere from 2% to 15% of the unpaid taxes. You could also face responsibility for the Trust Fund Recovery Penalty if the IRS determines that you willfully failed to pay payroll taxes.

If you can’t keep up with these obligations, you may want to consider outsourcing your payroll compliance.

Worker Classification Issues

Small businesses may prefer to use independent contractors to stay flexible and keep costs down. This can be a good business strategy, but you need to be aware of the risks of worker misclassification.

If the IRS determines that your independent contractors are actually employees, you could be responsible for the employer portion of employment taxes you should have been paying. If you have a lot of reclassified workers, this can add up to a huge tax bill.

The test for determining whether a worker is an independent contractor or employee is mainly about control. If you make all the decisions about when, where, and how your workers do their work, you could be risking a worker misclassification case.

Underpayments or Late Tax Payments

On top of everything else, you need to be making estimated tax payments for your business four times a year. If you don’t pay enough, you risk underpayment penalties and a large tax bill in April.

If you end up owing when you file your return, don’t hide from the problem. Many businesses can’t afford to pay their tax bill in full, but you’ll be much better off if you’re proactive about your tax debt.

Contact a tax attorney to go over your tax debt repayment options. You may be able to reduce your tax penalties, get more time to repay your taxes, or settle your debt.

Get help with small business tax problems by calling The Gartzman Law Firm at (770) 939-7710. We can listen to your concerns and help you find the best tax resolution strategy for your case.