North County Tax and Accounting Reports ‘The Top Reasons To Not Keep Secrets From Your Accountant’
Although filing an inaccurate tax return may not be as life-threatening as your doctor not having a complete health picture, it can certainly be life-changing. The repercussions from tax returns containing wrong or missing information can include: reduced refunds, audits; penalties for late payments, negligence, and fraud; interest on unpaid back taxes; joint liability and even tax evasion charges.
Neither the Internal Revenue Service nor the Franchise Tax Board cares that you may have simply forgotten to declare income and other earnings. Nor do they care that you forgot to take all of the deductions to which you are entitled.
The reasons people withhold information from their accountants aren’t necessarily with illegal intent. Many times it is simply because they don’t realize they are missing out on deductions, or they just forget. Some of the top overlooked matters that your accountant needs to know about include:
- Changes to family or marital status: Getting divorced, separated and married affect your taxes. Having a new baby, adopting, a child turning 18 or going to college affects your taxes. Taking care of elderly parents or a disabled child or adult affects your taxes.
- Income or loss from a lawsuit: Although settlements from a lawsuit are rarely taxable, there can be aspects of the settlement that might be. Certain business expenses that are part of a business lawsuit may be deductible.
- Overseas investments, bank accounts, and other assets: Bank accounts, investments, real property and other assets that are held in other countries must be reported. Failing to disclose foreign assets can result in large fines and possible criminal charges.
- Failure to file tax returns for prior years: The longer you wait to file, the more trouble is brewing. Your accountant can help you file past returns so that interest and penalties stop piling up. If you owe for past years, your accountant can help you get a payment plan.
- Failing to mention income, such as gambling income or a side business not only creates fines and penalties, it might deprive you of legitimate deductions that are to your benefit. Some people don’t disclose tip income to their accountant, thinking that tips are not taxable if they don’t appear on the W-2 form. However, the IRS requires people who earn tips to keep a daily record and report tips as income.
- Paying personal expenses from a business account does not mean those expenses are automatically “business deductions.” Tell your accountant if you have used business funds to pay for personal expenses so proper adjustments can be made.
- Paying people “under the table” is not doing anyone any favors. Doing so can come back to haunt you. Not paying wages in an appropriate manner, or failing to keep accurate records of contracted services can result in audits and penalties for everyone involved. Your accountant has the expertise to make sure you meet all of the payroll obligations and record all business-related expenses, including those for business-related services such as janitorial and professional services.
- Not paying taxes, for any reason: Tax agents don’t look favorably on those who miss estimated payments or don’t pay their taxes. Tell your accountant when you have missed payments or haven’t paid. Life happens and unexpected medical expenses, business downturns, debt, even being the victim of embezzlement can cause people to feel they have to skip tax payments in order to take care of emergencies. Your accountant can help you negotiate payments so you can get caught up. In some cases, you may qualify for a penalty waiver.
The more your accountant knows about your finances the better for you. Even matters that don’t seem important can be. Let your accountant determine what is relevant. Your account is obligated to file accurate tax returns on your behalf, but is also obligated to confidentiality and does not disclose personal information about you or your business that is not related to accurate tax returns.
This press release is by Paso Robles SEO and online marketing company Access Publishing, 607 Creston Road, Paso Robles, CA 93446, (805) 226-9890.