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Tax mistakes can have big consequences for small businesses

For a small business owner, there are many mistakes that could have serious ramifications for their business. Tax mistakes certainly fall into this category. Allegations of having made such mistakes could expose a business to intense Internal Revenue Service scrutiny, audits, a big tax bill or tax penalties.

So, when a business owner has been accused of making mistakes related to tax issues connected to their business, one of their top priorities may be to minimize the impacts the situation will have on them and their business. There are many different tactics and approaches which could be taken towards such a goal. Various things about the business owner, their business and the nature of the allegations against them could impact which such methods would be the best fit for the situation. Skilled tax attorneys can help business owners facing tax mistakes allegations in their efforts to find the right approach for their situation.

Given the major impacts tax mistakes can have for them and their business, such mistakes are something small business owners may want to keep a close eye out for. Some examples of the significant tax mistakes small business owners could fall into are:

  • Claiming that a hobby is actually a business. A hobby business triggers a different set of rules regarding tax matters, including deductions, than a standard business. So, being accused of treating a hobby business as a standard business in their taxes could expose a person to serious troubles with the IRS.
  • Not being careful enough when it comes to deductions. There are many strict rules regarding what can be deducted and what can’t when it comes to businesses. This includes rules on: when travel and meal expenses can be deducted, when a home office deduction can be taken and limits on startup expense deduction. Not paying attention to such rules could lead to a business facing allegations of taking improper deductions.
  • Failing to report income. There are many types of income a business could have coming in, both trackable and non-trackable. Under-reporting/hiding of income is among the things the IRS is on the lookout for when it comes to small businesses.

Source: USA Today, “Abrams: The 6 worst small business tax mistakes,” Rhonda Abrams, April 4, 2017

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