With 2014 drawing to an end, Ohio residents are gearing up for a New Year and a fresh start. While individuals may be contemplating their New Year's resolutions, small business owners are busy planning and preparing documents related to end-of-the-year tax matters.
For many individual taxpayers taxes are a source of angst and anxiety. This is often especially the case for small business owners and entrepreneurs who may be confused over certain tax matters or worry that they made mistakes on - or forgot - to file certain tax documents.
Unfortunately, as we've noted in previous blog posts, the IRS tends to more closely scrutinize the tax documents of small business owners. Considering the complex and confusing nature of tax codes, rules, regulations and laws, it's likely no small coincidence that small business owners are readily subjects of IRS audits.
Small business owners may be unfamiliar with tax regulations or may fail to keep abreast of changes to tax rules and regulations that may pertain to them and their business. Additionally, small business owners may make mistakes when preparing tax returns, taking deductions and claiming credits. Given the complexity of IRS rules and their ever-changing nature, it's no wonder that a small business owner may error when preparing or paying taxes. Unfortunately, a simple explanation of ignorance, even if valid, is typically not enough to absolve one of responsibility.
When choosing whether or not to fine a small business owner or charge him or her with criminal tax charges, the IRS must consider if an individual's actions were willful, or intentional. For example, did a small business owner intend to underreport income, fail to file a certain document, or claim unwarranted tax credits?
As a whole, the IRS tends to take a firm stance when it comes to the responsibilities of tax payers. The onus is always on the taxpayer to determine and discover applicable rules and documents, and prove their innocence. Therefore ignorance is almost never an effective defense to free one of tax liability or criminal responsibility.
If the IRS has contacted you about something you may have misunderstood? How you respond can be critical - contact our office to discuss your situation.
Source: Forbes, "What IRS Calls 'Willful' -- Even A Smidgen -- Can Mean Penalties Or Jail," Robert W. Wood, Dec. 3, 2014
