Small business owners across the country are getting back to focusing on their companies now that they’ve filed their income tax returns. But many of those owners may still have some tax work to do.
Those who had to rush to compile their returns should find ways to avoid the last-minute angst next year. That’s especially important for owners who run into the same situation year after year.
Some owners may find that sending in their return doesn’t mean they’re done with the IRS this year. The government may have questions about the return. Or owners may discover they made a mistake and need to amend the return.
HOW CAN YOU MAKE THE TAX PROCESS EASIER?
If you had to sweat to get your return completed, then you need to think about how to get next year’s return done with a minimum of stress.
Some owners struggle because they try to do it all themselves. Others have books that are chaotic — if they even exist at all. Then there are the procrastinators, who just don’t get around to starting on their returns until the deadline is painfully close.
In many cases, the solution is to get some help. Hiring someone, even a part-time bookkeeper, to help you maintain organized and accurate books will simplify compiling next year’s return. Hiring an accountant or tax attorney to do the return will also calm your nerves. And maybe save you money on taxes, since a paid preparer probably knows better than you how to use the tax laws to your advantage.
If you’re one of the many owners who got an extension of the filing deadline because you were disorganized or too busy, you should consider getting the help now, and have your bookkeeper and accountant handle the return before the Sept. 15 deadline for corporations and Oct. 17 deadline for individuals.
IF YOU GET A LETTER FROM THE IRS
Getting a letter from the IRS about a return can be a chilling moment for any taxpayer. But it probably doesn’t mean that you’re about to undergo a full audit.
The IRS can question a return anytime up to three years after it is filed. But note that if you decide to amend your return for any reason after it’s filed, the three-year period will start fresh from the day the amended return is filed.
Most of the letters that business owners get are requests for explanations or more information about items on a return. A common one is when the IRS can’t match income on a return with 1099 forms it has received from employers. So if you’ve forgotten to include income from one of the contract jobs you did, you’ll probably be hearing from the government.
Gregg Wind, a certified public accountant with Wind & Stern in Los Angeles, says many of the letters taxpayers get from the government arrive within two to three months after a return is filed. But you still might hear much later.
If you get a refund, that doesn’t mean you’re in the clear. “Sometimes, the refund is processed automatically and then questions are asked,” Wind said.
The information on tax returns is analyzed by computers that can pick up discrepancies or items that look unusual. For example, if you have a small plumbing supply business but spend the kind of money on meals and gifts that someone in the entertainment industry might spend. A computer can pick that up. In such cases, the IRS may ask to see your receipts and records, Wind said.
If you do get a letter, it’s a good idea to talk to a CPA or tax attorney before contacting the government, even if you compiled your return yourself.
AND IF YOU FIND YOU MADE A MISTAKE
You can amend your return using IRS Form 1040X, Amended U.S. Individual Income Tax Return or Form 1120X Amended U.S. Corporation Tax Return. Partnerships should refile Form 1065, U.S. Return of Partnership Income. You’ll need to explain the changes on each, and attach any necessary schedules like Schedule C, Profit or Loss from Business, if they are being amended.
Amended returns need to be filed on paper, even if the original return was filed electronically. All the forms have instructions. The IRS notes in the instructions that it can take three or four months to process amended returns.
The Associated Press.