Taxes
Streetwise Tips

Streetwise Tips on Taxes

Work with the IRS
While it true that tax collectors are bound by many rules and regulations, they are often quite flexible to deal with. If you have made an honest tax mistake, have really run out of money, or haven't filled out the proper form, you might be able to avoid penalty or even interest payments. You just need to find the proper way to channel your request.

For example, in making the giant mistake of handling my own payroll taxes, I neglected to change to a faster payment schedule when the company employee count increased in size. The IRS allows a single occurrence of this oversight without penalty. Unfortunately, I made this mistake more than once and was hit with a several-thousand-dollar, and perfectly legal, penalty. I paid the penalty but also decided to write to the IRS and plead for a rescindment. Ten months later the IRS refunded my penalty with interest! Naturally, however, the interest was subject to taxes.

Decisions and taxes
While taxes are a heavy burden on any successful business, you are generally better off if you avoid making business decisions based on their tax implications. Avoiding taxes can mean avoiding profits!

Tax preparation
Have an outside accountant do your taxes. Even though you might have a great conceptual understanding of tax regulations and filing procedures, someone who files hundreds of tax returns a year will simply be able to do yours more efficiently than you can. And they should be up on the very latest in rules and allowances many of which you may not be aware of. It will save you time, if not money, in the long run.

Don't underreport income
No matter how determined you are to be aggressive with your tax return, don't underreport your income. The IRS is increasingly suspicious of taxpayers, especially small business owners, who seem to have lifestyles that cannot possibly be supported by the incomes they report. You could find yourself the subject of a lifestyle audit.

Consider a new fiscal year election
If your business experiences its strongest profitability toward the end of the year, you might be better off ending your fiscal year mid-year. This would delay your income tax payments on year-end profits, as well as your higher estimated income taxes toward the next year's tax bill.