Do You Have a Habit of Keeping Proper Tax-Related Records?
How many IRS horror stories have you heard from fellow business colleagues? Every year, companies face backlash from the Internal Revenue Service (IRS) due to unpaid or underpaid taxes. Don’t let this be you. In this article, I’ll provide you with a few quick tax-pro-related tips to practice when working with bookkeeping and accounting companies.
Many times when the IRS goes after underpaid taxes, taxpayers tend to blame their tax pros. In these dire situations, it is easy to take that route in order to save your own company. However, this can backfire on your business if you do not have proper records.
How To Prevent IRS Backlash And Issues With Your Tax Professional
Making a note of every piece of information passed on and shared between you and your tax professional can save you big time in the long run. Effective documenting can protect your company from facing any issues with the IRS and your tax pro during tax season. Keeping clear and precise records as you go along is the best way to protect your business while preparing for the next tax season.
Here’s list of what to you need to document:
– Conversations and correspondences between your business and your tax pro.
– All actions taken by your tax pro.
– Resources passed on to your tax pro. This includes information on anything they needed to know to make a decision and any recommendations against a particular course of action.
– All documents filed with the IRS. Ensure that they are disclosed with the required details and does not misstate or omit key information.
Always pay attention to your books to ensure that you are only paying the IRS what you owe in taxes. This way, you can ensure that you are not being swindled by your tax professional.
If any issues arise with the IRS or your tax professional, efficient documenting will save you from getting dragged into a vicious lawsuit, being forced to pay hefty fines, having your business reputation dragged through the mud, or losing your practicing license.
If you have not already made this a habit, it’s time to start. Remember, always be precise and consistent.
Bonus Tip: If a client tries to transfer the blame for underpaid taxes to you, a simple letter or email to your client with the essential information should be enough to protect you from adverse actions by the IRS.