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3 Things You May Not Know About the IRS

IRS and small businessThe IRS is one of those government sectors surrounding by mystery and intrigue.  We picture stern looking men in dark suits, always with the looming atmosphere of threat surrounding them.  As taxpayers, we’ve learned to dread audits with the same fear with which we regard natural disasters.  Fortunately, the air of danger and fear surrounding these IRS agents is often exaggerated.

  1. When filing there ARE tricks to avoid an audit:  First of all, don’t round your numbers because the IRS views this as an estimation.  Secondly, failure to sign a form can flag it as suspicious.  Finally, explain large deductions.  Essentially, any form submission that sticks out makes you a potential victim for auditing.
  2. Timing is everything: As a small business, timing when your employees receive bonuses and overtime can affect your bottom line.  With bonus payments, often these payments coincide with payment of payroll taxes and the two must meet up.  This mistake can cause penalty action to be taken.  In the event of overtime, this must be tracked on a weekly basis regardless of your payroll schedule.
  3. Be careful to keep your payroll expenses separate from your operating expenses:  If the IRS thinks you’re dipping into your payroll funds to pay general expenses for your business, you could be looking at quite severe penalties.  Be sure to keep accurate records, and don’t co-mingle finances.

Often the IRS isn’t the unfriendly, frightening figures we fear them to be.  If you’re diligent with record keeping, and are honest in your returns, direct contact with IRS can mostly be avoided.

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