Learning you have tax problems can create a great deal of stress and frustration if you don't your options. For most people the problem is the result of an underpayment of payroll taxes; most people don't discover this until they go to file their IRS taxes for the next year, and by then it is too late to do anything about it for that tax year. It may be the result of an error on the part of the employer, having a second job or claiming too many deductions during the year. Whatever the reason may be, the ensuring tax problems that result necessitate the guidance of someone experienced in tax law such as a tax accountant or a tax lawyer. The sooner you face the problem and begin working on a solution, the sooner you can relax and stop allowing it to consume your every waking moment.
The first thing you need to do is analyze the severity of your tax problems. This analysis will provide you with the information necessary for you to develop a plan of action for choosing the right solution for your problem. The solution you choose not only needs to be agreeable to the IRS but fit into your family budget as well. Before you even contact the IRS to discuss the problem you need to make sure you have all your financial records together in order to assess your situation and determine the solution that is right for you. The information you will need includes but may not be limited to the following:
- Net income
- If you own your own business you need to have the most recent income statement and balance sheet
- Bank statements
- Business owners need to have accounts payable/accounts receivable information
- List of household bills
- Additional income and sources
The failure of an employer to deduct enough IRS taxes from a person's paycheck is not the only method for creating tax problems. Business owners regardless of size that fail to pay their quarterly income taxes will be forced to pay a substantial amount of taxes for that tax year. One of the reasons this happens is because the IRS imposes penalties on business entities that fail to file quarterly returns when they are required to do so. The assessment of a self-employment tax can also add substantially to the amount of taxes even a home-based business must pay. In spite of the absence of much of the overhead a brick and mortar business incur, home-based businesses can incur a number of tax problems if they are not careful.
Preventing tax problems is much easier than solving them after they occur. You want to begin by making sure your employer is deducting the correct amount of money from your paycheck and avoid claiming more deductions than you will be allowed to claim when you file your IRS taxes. Anyone operating a home-based business must make sure to set money aside for paying taxes when they are due, and large businesses must be sure to file quarterly income tax returns as the law requires. A business owner can also prevent tax problems by contacting with a tax accountant or tax advisor. These professionals know that the law requires and can provide advise on handing any problems that may occur before they become major expenses.