Thursday, April 21, 2011

Small Business owners may still have tax work ahead

Small-business owners across the country are getting back to focusing on their companies now that they've filed their income tax returns. But many of those owners may still have some tax work to do.

Make tax process easier
If you had to sweat to get your return completed, think about how to get next year's return done with a minimum of stress. Some owners struggle because they try to do it all themselves. Others have books that are chaotic — if they even exist at all. Then there are the procrastinators.

In many cases, the solution is to get some help. Hiring someone, even a part-time bookkeeper, to help you maintain organized books will simplify compiling next year's return. Hiring an accountant or tax attorney to do the return will also calm your nerves.

If you're one of the many owners who got an extension of the filing deadline because you were disorganized or too busy, you should consider getting the help now, and have your bookkeeper and accountant handle the return before the Sept. 15 deadline for corporations and Oct. 17 deadline for individuals.

If you get a letter from the IRS

Getting a letter from the IRS probably doesn't mean you're about to undergo a full audit. The IRS can question a return anytime up to three years after it is filed. But note that if you decide to amend your return for any reason after it's filed, the three-year period will start fresh from the day the amended return is filed.

Most letters that business owners get are requests for explanations or more information about a return. A common one is when the IRS can't match income on a return with 1099 forms it has received from employers.

If you get a refund, that doesn't mean you're in the clear. The information on tax returns is analyzed by computers that can pick up discrepancies or items that look unusual. In such cases, the IRS may ask to see your receipts and records. If you do get a letter, talk to a CPA or tax attorney before contacting the government, even if you compiled your return yourself.

If you find you made a mistake

You can amend your return using IRS Form 1040X, Amended U.S. Individual Income Tax Return or Form 1120X Amended U.S. Corporation Tax Return. Partnerships should refile Form 1065, U.S. Return of Partnership Income. Amended returns need to be filed on paper, even if the original return was filed electronically. All the forms have instructions.