If you haven’t done it yet, you will someday. Your small business is up and running and now it’s time to do your taxes. Small business tax returns aren’t as difficult as you might think but just like IRS paperwork for your personal income, it’s easy to make mistakes so what do you do if you inadvertently file your return with an error?
Remember that if your small business tax return is filed and you received a larger check than what you’re entitled to, and you deposit it, you have committed a crime in the eyes of the IRS and it’s important to correct that error.
First, be proactive. Don’t wait for the IRS to come to you. It may seem like a good idea to stay quiet about en error and hope that the IRS doesn’t find it rather than fixing it by contacting them first. The truth is that it will most likely be less expensive if you contact them instead of waiting for the IRS to contact you.
Next, if you do receive a notice from the IRS, don’t assume that it’s correct. The IRS only knows what they read on your small business tax return and that’s only a small snapshot of your business. Before acknowledging the mistake as valid, make sure you thoroughly research the item. If you don’t understand it, hire a tax attorney to help. Hiring an attorney may seem expensive but if they can help you not to make the same mistake again next year, it’s worth the cost.
An alternative to hiring an attorney is to visit an IRS office. You might have heard the horror stories of an audit but in actuality, they are happy to help you clear up any potential issues. They much prefer that you be proactive and allow them to help.
If an error has occurred, you will need to complete one of the IRS forms for an amendment of a tax return. Here are a few examples of those:
• Forms 94X, Employment Tax Adjustments
• Form W-2C, Corrected Wage and Tax Statement, and Form W-3C, Transmittal of Corrected Wage and Tax Statements
• Form 1120X, Amended U.S. Corporation Income Tax Return
Now that you have thoroughly researched the problem and found that there was an error in your small business tax return, you completed the amended forms and wrote a check for any additional taxes or penalties that may have occurred, what now?
You, of course, you need to make copies of all paperwork, attach any documentation, and send it via certified mail with a return receipt requested.
Errors on your small business tax return are going to happen but if you’re proactive about fixing them, they shouldn’t be a source of concern.