All businesses operating in the U.S. have to file an annual tax return, from a sole proprietorship to large corporations. (Partnerships still need to file an information return). The type of filing and tax rate depends on a number of factors, including the business type, size, and industry. Just like an individual tax return, the Internal Revenue Service (IRS) can issue penalties for tax violations. However, many IRS tax violations provide for higher maximum fines and penalties for businesses.
If you are a business owner dealing with a federal tax issue, have a question about business taxes, or received an IRS notice, contact Juda Gabaie at Gabaie & Associates, LLC for help.
Overview of Federal Business Taxes
There are many taxes a business needs to deal with, including state and local taxes. The primary types of federal business taxes that small businesses have to report and pay include:
- Income Tax
- Estimated Taxes
- Employment Tax
- Excise Tax
- Self-Employment Tax
Individual taxpayers generally only think about their tax issues before the filing deadline in April. However, businesses need to make regular payments and withholdings throughout the year. If taxes are not automatically withheld or not enough is withheld, the business may have to make regular tax payments based on income as it is earned.
Small-Business and Self-Employed Tax Issues
Many self-employed and small-business owners have issues dealing with the IRS where it is not always clear what is a personal tax issue and what is attributed to the business. Tax issues for self-employed or small businesses may include:
- Hobby-Loss Rule
- Estimated Tax Payments
- Payroll Taxes and Bookkeeping
- Offers in Compromise for Tax Debt
- Home Office Deduction
Many new businesses start with the founder working endlessly to get the business off the ground. Starting a new business, working as an independent contractor, or freelancer may mean that the taxes that were recorded in your pay stubs as an employee will now be your responsibility as a self-employed individual.
Being self-employed generally means pay self-employment taxes towards social security and Medicare. Self-employment taxes are generally required for any income of $400 or more. However, you may be able to deduct half of your self-employment taxes as an adjustment to gross income. Failure to pay or underpayment of self-employment taxes may result in a penalty.
Business Tax Penalties
When a business makes a mistake in filing a federal tax return, intentionally fails to file, or does not turn over the required taxes to the IRS, the IRS may come after the business for unpaid taxes, including additional penalties. Tax penalties on businesses may include:
- Failure to pay taxes penalties & interest
- Underpayment tax penalties & interest
- IRS failure to file or late filing penalty
- Tax fraud penalties
- Accuracy related penalty
- IRS audit penalties
- Trust Fund Recovery Penalty (TFRP)
In tax fraud cases, the IRS can also go after the taxpayer or business owner for criminal penalties. Criminal penalties for businesses generally allow for higher fines. Criminal tax fraud convictions may also carry the possibility of jail time.
Maryland Tax Lawyer
Business owners may not have the time to deal with IRS tax notices or letters. If you received a notice from the IRS, contact Gabaie & Associates, LLC for a free consultation. We have successfully represented businesses small and large in dealing with the IRS, challenging tax assessments, and avoiding tax penalties. Contact Juda Gabaie online or call (410) 862-2198 for help with your IRS or Maryland tax issues.