When I was on the Big Biz Show with Sully and Russ this month, we were talking about how the recent economic crisis has had a lot of people re-evaluating how they borrow and invest.
If you recall back in the late 80s early 90s when we had the last big recession, the price of gas was $1.20 and people had to make the decision on whether to pay the mortgage or pay taxes. Today, gas hovers at about $3.50, and now people are deciding between putting fuel in their cars and paying the mortgage. So many people have put paying their taxes on the back burner.
What I tell people who are behind on their taxes or maybe haven’t filed in a few years is: Make a voluntary discloser. It is a misdemeanor not to file you taxes so you are essentially a criminal if you owe taxes and haven’t filed. And if you are in this situation, the best thing you can do is get expert representation.
We go to the IRS for our clients and tell them that we are in the process of filing accurate returns and that after they are completed, we will do a payment plan or offer in compromise. We step into the taxpayers’ shoes after they give us power of attorney so the IRS has to work with us to figure out a tax resolution plan.
In addition to stepping up their enforcement efforts on late filers, the IRS is also going after corps and small business that aren’t complaint. People may not be aware that s-corps or c-corps require that anyone who’s more than a 5% shareholder (which is 99.5 % of people who have s-corps) be considered on payroll and employees of corp – so they must have taxes withheld.
To avoid payroll tax problems, people in this situation can’t make the mistake of taking a paycheck out as if they were a 1099 employee. That is considered a dividend payment and they’re going to pay taxes twice: at the corporate level and at the individual level. Plus they’re going to pay employment taxes on it.
You don’t want to take any chances with the IRS, so stop putting your tax issues on the back burner. Click here to listen to more expert tax tips on the Big Biz Show.
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