Tax season is officially here, and individuals ranging from small business owners to top executives at the largest corporations are thinking about business taxes. It might not be the time of the year you mark on your calendar with a big smiley face—but it’s important nonetheless.
How you are feeling about upcoming tax deadlines may depend in large part on the extent to which you are confident in the accuracy of your recordkeeping and your chances of avoiding the dreaded Internal Revenue Service audit. With this in mind, there are two very important ways you can help your business have a smooth tax season this year and well into the future.
Understand your legal entity
When it comes to business and corporate taxes in the U.S. Virgin Islands, much depends on the legal entity under which your company operates. Whether it’s a sole proprietorship, a partnership, a limited liability company (LLC) or a corporation will determine a number of issues related to your taxes, two of the most important of which are the rate at which you will be taxed and the forms you need to submit.
Generally, sole proprietorships, partnerships and most LLCs are taxed at the same rates as individuals, whereas certain other LLCs and corporations are taxed at corporate rates. Knowing the legal entity of your business will also make it easier to ensure you are using the proper tax forms, as different entities are required to submit varying forms with their tax returns. Check with your tax accountant or business attorney to ensure you are using the right forms, as this will help improve your chances of submitting a completely accurate return.
Maintain accurate records
The other way in which accuracy plays a key role is when it comes to your company’s recordkeeping. In addition to making it easier to submit an accurate tax return, as you’ll have thorough, complete and accurate financial records to work with, you will also make the process easier in the event of an audit. If you are able to show the auditor where you got your numbers, you can demonstrating both your willingness to work to resolve the issue and, hopefully, that your numbers were correct in the first place.
Even if you do find yourself the subject of unwanted attention from the IRS, an audit is not the end of the world, particularly if you cooperate with the auditor. And even if the auditor determines that your business owes additional tax payments (as well as interest and penalties), you still have some recourse in the form of an appeal should you believe the auditor’s decision is unjust.
Perhaps not surprisingly, the process of appealing an IRS decision is complex, and your business would likely benefit from the counsel of an experienced and knowledgeable attorney. If you have questions about the appeal process, or if you have general concerns related to your business taxes and the possibility of an IRS audit, consult a trusted legal professional.
BoltNagi is a respected and established business tax law firm proudly serving clients throughout the U.S. Virgin Islands.