Getting your tax return right the first time is something all business owners and individuals strive to achieve. However, an incredibly complex and ever-changing tax system means we all make mistakes, even the IRS!
According to this MSN Money article – “Don’t panic if the IRS sends you a letter*” – the IRS sends more than one million letters to people each year simply because they forgot to sign their returns.
While it’s impossible to address the countless number of human and computer errors that can impact business taxes, this article sheds some light on how to correct common tax mistakes, while providing guidance for handling tax disputes and tips on preventing an IRS audit.
Taking Care of Mistakes Before the IRS Contacts You
If you know that you have omitted information from your tax return, made an error, or missed a filing deadline, it’s always best to take care of it before receiving a notice from the IRS – which can result in unnecessary interest, penalties and other complications.
Here is some guidance on common business tax errors and the process of fixing them:
- Correct Information about Total Earnings and Withholdings – To correct any mistaken information filed about total employee earnings and withholding for the year, you’ll need to complete Forms W-2C and W-3C. This can be done online at the Social Security Administration Web site here.
- Overpayment or Underpayment of Employment Taxes –If you have made an error that has led to overpayment or underpayment of employment taxes you will need to file an amended employment tax form. The IRS provides links to the appropriate forms for you needs here. Read more about your employment tax obligations from Business.gov.
- Individual Tax Return Errors – Any mistakes on your individual tax return should be corrected using Form 1040X. If you owe tax, send the amount owed with this form to stop penalties and interest from accruing on the additional tax owed.
- Mistakes on Partnership Returns – If you made a mistake on your business partnership return, check the box for “amended return” on Form 1065 and give each partner a copy of amended Schedule K-1.
- Mistakes on S Corporation Income Tax Returns – To correct an error on a previously filed Form 1120S, file an amended form by checking “amended return” on page 1 and follow the instructions. Then provide each shareholder a copy of the amended Schedule K-1.
- Mistakes on Corporation Returns – Use Form 1120X, and send any owed tax with the form.
- Corrections on “Information” Forms 1099 and 1098 – If you have made a mistake on an information return (always prefaced with 1099 or 1098) just refer to the instructions that come with the forms.
Don’t Ignore Notices from the IRS
If you do receive a notice from the IRS, whether it’s requesting payment or seeking additional information regarding your business tax return – open it and act on it. Putting off contacting the IRS, especially in the case of notices requesting payment, can increase the amount you owe because penalties and interest keep accruing.
Whether or not you agree with the notice, call or write to the contact person listed or visit yourlocal IRS office before the deadline. There is a also additional IRS contact information on the IRS web site.
Avoid a Tax Audit
Although less than 1% of taxpayers are selected for a tax audit, business filings that report year-after-year losses, large charitable contributions, or claim large tax deductions may raise red flags for the IRS. Read “When Avoiding a Tax Audit – the Best Offense is a Good Defense” for guidance on how to file your tax return in a way that minimizes your chances of getting audited.
Appeal a Tax Dispute
If you are unable to resolve tax mistakes with the IRS or dispute how the IRS has determined your tax status, you can file an appeal with the IRS Appeals office. The Appeals process operates independently of any other IRS office and is intended to be a fair and impartial way to settle tax disagreements without you having to go to the Courts for a formal trial. This Appeals Guide from the IRS explains what the Appeals process can do for you and can help you determine if it’s right for you.
If you feel that you are being unfairly audited, over-regulated or penalized by the IRS or any other federal, state or local government agency you can file a complaint with a small business Ombudsman. Read more about the process and what it can do to help you here: “Is the Government Regulating You Unfairly? - Contact an Ombudsman”.
No comments:
Post a Comment