Today, no business is impervious to tax penalties. As the IRS tightens the grip on tax avoiders, it is more vital than ever for your business to meet regulated tax requirements. As much as paying an extraneous amount of tax penalties is a waste of resources, it also affects the future of your business.
And not knowing what you should and should not avoid can be an exhausting process. Whether it is a major or unexpected tax penalty, it is time for you to create a defense mechanism to safeguard the interests of your business.
Here are some of the most practical tax avoidance tips you should be aware of in 2020:
Deal With Underpayment Penalty
There is a good chance you are knowledgeable about underpayment penalties by the IRS. The solution is to have a collective financial process that allows you to manage and update your books regularly. You can, on the other hand, perform a tax estimate to assess your withholding sources. After that, you can go with the correct predicted tax value for each quarter.
Amount Adjustment by the IRS
Technically, it may not qualify as a penalty, but business owners should view it as one. It is, after all, an added tax amount found in certain items of your tax returns that do not pan out during a tax audit. Ideally, your tax expert should evaluate your different types of transactions to verify the correct order and categorization of your financial books.
Filing Tax Returns after Deadline
Failure to file a tax return before the due date is arguably the most common way to owe the IRS. The nature of the amount, however, varies as per your business structure. Furthermore, the amount of the tax penalties ranges from 5% to 25% for each unpaid tax penalty.
Apart from having a robust financial process, you should collaborate with a tax professional that informs you about important tax filing due dates. And even if you don’t have the required funds, you should still file your tax returns promptly.
From payroll forms to tax payments, if you fail to pay taxes on designated deadlines, it will result in penalties. A proper payroll system set up by a CPA can help avoid these costly penalties.
Incomplete and Late Form Submission Penalties
In addition to annual tax returns, businesses are required to file tons of forms throughout the year. Failure to file these forms on time can result in significant penalties. If you, for instance, do not send Form W-2’s to the IRS before January 31 every year, it will inevitably lead you to some hefty penalties. A number of solutions are available to keep your business on track when it comes to filing deadlines.
Final Thoughts: Hire a CPA
Seeking the services of a qualified CPA will always be in your best interest. Without accounting proficiency, preparing, managing, and filing tax returns can be a daunting task. A CPA or qualified accounting professional can help demystify the complicated world of taxes and tax returns and help your business avoid IRS troubles and costly penalties.