Business Tax Resolution & Consulting for Seattle Businesses
Small businesses are the backbone of our local economy here in Washington, but as busy as small business owners are operating their businesses, it’s hardly surprising that a staggering number of small business owners in the Seattle-area experience business tax problems at some point in the life cycle of their business – often very early on. When you’re working morning to night trying to build a profitable business, the last thing you need is the stress and distraction of an IRS business tax audit or accruing tax penalties!
Business tax problems can be classified into 3 buckets:
Payroll Tax Problems
Sometimes business owners fall behind on their obligations and use payroll tax withholding to cover other business expenses. This is a path that will lead to serious business tax problems. Failure to file form 941 can be easily corrected by a tax accountant, but you must do so or you can be certain that the IRS will contact you quickly and consistently until the problem is cleared up. Furthermore, failure to pay payroll taxes will subject you to tax penalties and potentially liens and asset seizures. This particular type of business tax problem demands your prompt action.
Worker Classification Issues - Employee or Contractor?
While you may think of your workers as independent contractors, it’s quite possible that under law, they are in fact employees. And, if they are employees then you owe payroll taxes on their wages. There is a multi-part, fact-based inquiry to determine whether your workers should be classified as employees or independent contractors and most of the factors relate to the degree of autonomy by the worker. In other words, do you control the contractors’ time and the way they perform their job? If so, the “contractor” is quite likely an employee. If you are in doubt about whether your workers are employees or independent contractors, you should consult IRS Form 22-8 “Determination of Employee Work Status for Purposes of Federal Income Tax Withholding” to assist you in making the determination so you can avoid business tax problems.
Overstated Tax Deductions
Sometimes the line is blurred between personal and business related expenses, and this can lead to business tax problems. Of course, you can only deduct business expenses, not personal vacations, transportation, or home improvements. Moreover, the Internal Revenue Code imposes the burden on you to prove that you are entitled to the deduction; the IRS need not prove that you’re not entitled to it to prevail against you. So, for example, if you write off a portion of your auto expense, you better have a detailed log showing how your vehicle was used for business. Failure to do so subjects you and potentially your business to serious tax problems.
Comprehensive Business Tax Relief and Consulting for Seattle Business Owners
If you are a Seattle-area business owner and want to proactively plan to avoid business tax problems, or if you have already been notified of business tax problems by the IRS, contact us for a FREE consultation about your business tax problems.
The Seattle Pure Tax team