{"id":58,"date":"2023-03-29T21:11:28","date_gmt":"2023-03-29T21:11:28","guid":{"rendered":"https:\/\/www.pargofinancial.com\/blog\/?p=58"},"modified":"2023-05-18T14:21:01","modified_gmt":"2023-05-18T14:21:01","slug":"the-top-5-ways-businesses-get-in-trouble-with-the-irs","status":"publish","type":"post","link":"https:\/\/www.pargofinancial.com\/blog\/the-top-5-ways-businesses-get-in-trouble-with-the-irs\/","title":{"rendered":"The Top 5 Ways Businesses Get in Trouble With the IRS"},"content":{"rendered":"\n

As a small business owner, you probably know that willfully avoiding paying taxes<\/a> will lead to severe problems with the IRS; however, IRS problems<\/a> aren\u2019t always a result of a business owner\u2019s intentional actions. These are five ways business owners can get into trouble with the IRS that they might overlook or not realize.
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Trouble with the IRS<\/figcaption><\/figure>\n\n\n\n

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1. Under-Reporting Income
In addition to the tax, you may owe on that income. Some individual self-employed people fail to pay taxes \u2013 either due to a lack of knowledge about tax laws or evasion. Hence, do not realize they are responsible for up to six years of back tax returns. This could also cause trouble with the IRS. Take note that if you do need to file back tax returns. Many deductions are not claimable on more than the most recent three returns.

2. Over-Reporting Expenses<\/h2>\n\n\n\n

If you\u2019re not sure what qualifies as an actual business expense, consult with your tax preparer or accountant. For a business expense to be deductible, it must be ordinary and necessary. An \u201cordinary\u201d expense is common and accepted in your business; a \u201cnecessary\u201d expense is helpful and appropriate for your business.
3. Failing to Report \u201cTrust Fund Taxes<\/a><\/h2>\n\n\n\n

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Employers are required to deduct taxes from employee paychecks. These taxes are held “in trust” until they are paid to the U.S. Treasury and are not given to employees as pay. Hence, “trust fund taxes.” These taxes (sometimes known as “withholdings”) include income tax, Social Security, and Medicare. The IRS will consider this tax fraud, which is quite problematic, if not disclosed.
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4. Forgetting the Self-Employment Tax
Self-employed taxpayers must pay self-employment (SE) tax, consisting of Social Security and Medicare taxes, to the Treasury. The SE tax is 15.3 percent (12.4 percent for social security (old-age, survivors, and disability insurance) and 2.9 percent for Medicare (hospital insurance) of net self-employment income in addition to income taxes. Note that the SE tax does not include any other taxes that self-employed people pay. Also, self-employed individuals can deduct the employer-equivalent portion of the SE tax when calculating their adjusted gross income (AGI).

5. Not Paying Estimated Quarterly Taxes
As a small business owner, you do not have taxes withheld from a formal paycheck as wage-earning employees do. However, that does not mean there are no taxes due to the IRS. If a small business owner anticipates a tax liability <\/a>of $1,000 or more<\/a>, they must send estimated quarterly tax payments to the IRS. Not doing so can lead to a whopping end-of-year tax bill with penalties, too.

Again, as mentioned above, consult your tax preparer<\/a> or trusted accountant<\/a> to help you make sure you stay in the clear with the IRS.

<\/h2>\n","protected":false},"excerpt":{"rendered":"

As a small business owner, you probably know that willfully avoiding paying taxes will lead to severe problems with the IRS; however, IRS problems aren\u2019t always a result of a business owner\u2019s intentional actions. These are five ways business owners can get into trouble with the IRS that they might overlook or not realize. 1. […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":""},"categories":[3,9],"tags":[],"yoast_head":"\nThe Top 5 Ways Businesses Get in Trouble With the IRS -<\/title>\n<meta name=\"description\" content=\"How many businesses get in trouble with the IRS. 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