Doing your own taxes is a viable option, especially if you’re running a small business. It’s perfectly fine if you’ve mastered this particular area of business, but if you don’t know what you’re doing, it would cost you.
Even the IRS warns against this practice. According to the agency, accidentally failing to comply with tax laws, violating tax codes, or filling out forms incorrectly can leave taxpayers and their businesses open to possible fines.
If you’re considering doing your own tax returns, check the possible risks below first. It may not be worth it.
Small Errors, Big Fines
Fancy tax software is useless if the person using it is not careful. When doing taxes, small errors could result in big regrets later on. This is why you’d need to enter all relevant information accurately. The IRS advises taxpayers to make sure your name and those of your dependents are spelled correctly, check for typos, and enter information as it’s been reported to you.
You Could Miss Paying Estimated Taxes
The IRS expects you to pay taxes as you earn or receive income during the year, either through withholding or estimated tax payments. If you are running a business, you are generally expected to make estimated tax payments. Failure to do so will result in a penalty. According to the IRS, business owners should generally make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed.
Business owners are required to use Form 1040-ES to figure out the estimated tax they owe. This is where the services of a tax professional would come in handy.
Chance of Missing Employment Tax Deposits
The taxes that you, your business, and your employees must pay to federal, state, and local agencies are called employment taxes. Social Security and Medicare taxes for self-employed business owners are also a type of employment tax.
The IRS is clear about the employer’s role of depositing and reporting employment taxes. They must deposit taxes they withhold, including the employer’s share of those taxes. Again, failure to do so on time can incur a penalty for the business owner.
You Could Easily Forget to File
The IRS expects business tax returns to be filed promptly just like individual returns. Business taxpayers should be aware of the tax requirements for the type of business they have to avoid late filing penalties.
If you filed late, you can still try to catch up, but at that point, you’ll likely face heaps of charges and penalties. This is the time when you call in tax professionals to negotiate on your behalf—something you should have done in the first place.
Need Help with Your Small Business Taxes?
If you need professional help, our experienced tax professionals can help guide you in the right direction. Contact us today at 818-452-2641 or fill out our contact form to schedule a free consultation.
