From Overdue to Overcome — 4 Strategies to Help Entrepreneurs Address Back Tax Issues

As the April 15, 2024, taxation filing deadline has travel and gone, galore entrepreneurs and mini business owners are near grappling pinch backmost taxation issues. Recent challenges person compounded these problems, making now a captious infinitesimal for business leaders to act. Delaying further tin exacerbate financial accent and ineligible repercussions.

Recent IRS information highlights the urgency for entrepreneurs to reside their taxation liabilities. The IRS, leveraging backing from the Inflation Reduction Act, has importantly accrued its enforcement efforts. In 2023 alone, the IRS launched a new compliance initiative targeting high-income non-filers, identifying complete 125,000 cases since 2017 arsenic portion of a sweeping effort to reconstruct fairness to the taxation system. Moreover, the IRS has enhanced its audit activities, peculiarly connected able individuals and ample partnerships.

Drawing from our team's extended taxation solution acquisition astatine Advanced Tax Solutions, present are 4 basal strategies for entrepreneurs to efficaciously resoluteness outstanding backmost taxes and hole for productive connection pinch the IRS.

Related: The Top 10 Ways to Avoid an IRS aliases State Audit

1. Understand the urgency and consequences

Ignoring backmost taxation issues tin lead to terrible consequences. The IRS tin enforce hefty penalties, including a 5% monthly precocious filing punishment for the first 5 months, which quickly adds up to 25%. After that, there's an further 0.5% per period penalty, positive liking connected the owed taxes, penalties and accumulated interest. In utmost cases, the IRS whitethorn record a substitute return connected your behalf, which often disregards deductions and leads to the highest imaginable taxation liability.

The IRS's accrued enforcement fund underscores the urgency. Drawing connected the caller IRA funding, the White House has budgeted to summation the IRS' yearly enforcement fund almost fourfold complete the adjacent decade, to $19.5 billion, and the agency has announced galore multiyear endeavors successful respective cardinal areas to summation collections.

2. Gather and shape financial records

Before contacting the IRS, guarantee each financial records are meticulously organized, including income statements, expense receipts and erstwhile taxation returns. A broad and organized grounds will make connection pinch the IRS smoother and show your committedness to resolving the issue.

Use integer devices and bookkeeping package specified arsenic Sage, Oracle and Xero to support way of your financial records passim the year. These devices tin thief make elaborate reports that are easy to stock pinch your taxation master aliases the IRS. The accounting package marketplace is quickly growing, pinch its worth rising from USD 11,071.6 cardinal successful 2018 to a projected USD 20,408.0 cardinal by 2026, reflecting an yearly maturation complaint of 8.02%, according to Fortune Business Insights. This inclination shows conscionable really captious these devices person go for effective financial management.

Related: Finally, Tax Season is Over. Or Is It? Here are 5 Things You Need to Do All Year to Reduce Tax-Season Stress.

3. Seek master help

Navigating taxation regulations tin beryllium daunting, particularly pinch analyzable backmost taxation issues. Hiring a Certified Public Accountant (CPA) aliases a Certified Tax Resolution Specialist (CTRS) tin beryllium invaluable. These professionals person the expertise to discuss pinch the IRS connected your behalf, perchance reducing your taxation liability and penalties. They tin besides supply invaluable guidance connected organizing your financial records and ensuring each archiving is meticulous and complete, preventing early taxation issues.

I've seen galore entrepreneurs importantly trim their taxation burdens by leveraging master help. Understanding the nuances of taxation rule and having personification who tin efficaciously pass pinch the IRS tin make each the difference. Even having a Master's Degree successful Taxation and 30 years of experience, immoderate returns show up successful my agency that I either person to collaborate pinch different professionals connected aliases moreover mention to different master who specializes successful that peculiar client's industry. Understanding your limits is simply a cardinal to empowerment. Taking connected a genuinely difficult rumor whitethorn require master thief because making a correction tin beryllium rather costly successful IRS penalties and interest.

That said, unless you person thing different aliases confusing, galore taxation returns are wrong scope to hole connected their own, particularly pinch the thief of taxation mentation software. I would not urge preparing a taxation return pinch conscionable pen and paper, moreover if it's simple. Sadly, the taxation system's complexity has progressively worsened complete the years, and location is nary extremity successful sight.

4. Communicate efficaciously pinch the IRS

On May 2, 2024, the IRS released an update connected its Strategic Operating Plan, which outlines the implementation of the Inflation Reduction Act (IRA). This update specifications the IRS's scheme to astir triple audit rates for ample corporations pinch assets complete $250 million, expanding from 8.8% successful 2019 to 22.6% by 2026. Additionally, audits connected large, analyzable partnerships will summation to 1% from a tenth of a percent. With these changes connected the horizon, it's ne'er been much important to enactment vigilant and guarantee your financial records are meticulously maintained truthful you're afloat prepared for heightened scrutiny.

When you're fresh to attack the IRS, preparation is key. Start by requesting your taxation transcript to get a clear image of what the IRS knows astir your financial situation. Be honorable and forthcoming successful your communication. Explain the reasons down your backmost taxes, whether owed to economical hardship, oversight aliases different factors. The IRS is much apt to activity pinch you if they spot a genuine effort to resoluteness the issue.

Related: 5 Small Business Tax Audit Triggers and What to Do If the IRS Comes Calling

By taking these steps, entrepreneurs tin toggle shape their overdue taxation issues into a manageable process, paving the measurement for financial stability and bid of mind. Remember, the cardinal is to enactment now and activity the correct thief to flooded these challenges.