Lacking an understanding of tax laws can kill your small business. Unfortunately, the intricacies of the tax code generally require a professional understanding, and you cannot simply claim ignorance. It is in your best interests to consult regularly with an Orange County business attorney to make sure that your business is abiding by tax laws.
Understanding Common Penalties
While the goal is to avoid tax penalties altogether, it is useful to gain an understanding of how the IRS imposes them. The IRS is ruthless in imposing penalties, often stacking them upon each other. The result can sometimes mean a tax bill 50% higher than the principal. It is far better to work with an Orange County business attorney to avoid any problems in the first place.
Some Common Penalties
Filing or paying late is perhaps the most common problem for a small business. Your company may simply not have the financial means of paying the tax. If this is the case, file anyway, and then try to work out an arrangement for payment with the IRS. A late payment will result in a .5% per month penalty, up to 25% of the bill. Late filing will add a full 5% per month. Failure to file at all is the worst of all – you could face severe penalties.
Underpayment of estimated tax is another common mistake, especially for the self-employed. You are required to pay 90% of the amount you will owe on a quarterly basis. A related issue is inaccuracies on your tax return. If, for instance, you cannot substantiate a deduction, and this is uncovered in an audit, your business’ tax penalty may amount to up to 20%.
For Further Information
For further information on tax penalties and IRS issues related to small businesses, speak with an Orange County business attorney. Call the Law Offices of Reed Aljian and Justin Daily to schedule a consultation at 949-861-2524.