As a small business owner, you may assume the IRS has bigger fish to fry than your small business operations. However, recent reports have cited that the IRS has increasingly targeted small businesses for tax audits.
The National Taxpayer Advocate estimates small businesses spend approximately 2.5 billion hours each year preparing tax returns or responding to IRS inquiries about their returns. This is the equivalent of 1.25 million full-time jobs. The study also cited that 70% of small businesses employ tax professionals for tax preparation and to represent their interests before the IRS.
To avoid wasting time, money, and resources, pay attention to your potential tax burden when forming your business. The formation stage is vital to maximizing deductions and minimizing your tax liabilities for the future.
With the Tax Cuts and Jobs Act in full effect, many small business owners are unsure how the new tax law will impact their tax bill. Many business owners don’t even know corporate income tax rates, business tax deductions, or what tax cuts they’re eligible for.
Every small business owner should understand these five important things that can affect the business’s income taxes and overall tax situation.