Picture this: you’re a thriving business owner, your operations are running smoothly, and your client base is growing. Life seems to be moving along nicely. But one day, you receive a letter from the IRS. Suddenly, your world seems to come crashing down. You’ve fallen into the trap of tax mishaps, and your livelihood is now at stake.
Avoiding or mishandling your tax responsibilities can lead to severe consequences.
We know it’s tempting to pretend that your tax nightmare will disappear if you don’t pay attention and don’t tell anyone, but that couldn’t be further from the truth.
Here are some tax mishaps that can send your livelihood down the drain and how to avoid them.
Ignoring your tax obligations is the first and most damaging mistake you can make.
The IRS is not an entity that you can simply ignore and hope the problem will go away. The longer you ignore your tax obligations, the more penalties and interest accumulate, transforming a manageable tax debt into an overwhelming financial burden.
It isn’t rare for us to work with a client that has incurred 40% interest since they decided to never contact the IRS to work out a payment plan.
Many business owners overlook or misuse tax deductions, resulting in unnecessary tax burdens. It’s essential to understand which deductions are applicable to your business and to claim them correctly.
An example of this would be understating your income, especially if you’re a 6-figure LLC that should move towards being an S-Corp.
We always advise our clients to become an S-Corp for ideal tax savings and to stay compliant once they hit above $250,000 in revenue.
Another example would be if you overstate your office fees, travel, or any other deductions that are extreme and don’t seem likely.
Everyone loves a good tax write-off, but be vigilant and honest about how you obtain them.
Receiving a notice from the IRS can be intimidating, but ignoring it can exacerbate the situation.
These notices provide important information about your tax situation and offer a window of opportunity to address any issues before they escalate.
No one is immune to tax mishaps.
They can strike when you least expect them, turning your world upside down. But by being proactive, keeping accurate records, understanding tax deductions, seeking professional help, and addressing tax notices promptly, you can avoid these common tax mishaps and keep your livelihood from going down the drain. Remember, when it comes to taxes, prevention is always better than cure.
— > NOTICE: IRS notices can come via certified mail, or they may even start to investigate you and talk to your businesses’ clients and employees.
If you need additional help with your current tax situation (and owe $15,000+) to the government, check out our services. (Call to action)