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Preparing for an Audit

Substantiation is the key to a successful audit of your small business tax return. The Internal Revenue Service has the right to look at any records used to prepare the return, so get ready to bring them in. But do not bring in a crate of receipts for the auditor to wade through. This is one situation where neatness really does count. The more receipts and paperwork the auditor has to search through, the more errors he or she can find. When the examiner asks about automobile deductions, your ability to produce a file labeled "car" not only builds the appearance of credibility but also prevents the auditor from finding potentially problematic items in your crate. In addition, going through all that paperwork to organize it refreshes your memory concerning the year in question.

Installment Agreements

The Internal Revenue Service wants you to pay as much of your federal income tax liability as soon as possible. In order to implement this goal, the IRS allows taxpayers who cannot pay the full amount owed on April 15th to apply for an installment agreement, under which the taxpayer will make equal monthly payments until the full amount of the debt to the government is eliminated.

Disabled Access Credit

If you operate a small business, you may be entitled to take a nonrefundable income tax credit for expenditures incurred to make your business accessible to disabled individuals. The amount of the credit is limited to 50 percent of the amount of eligible access expenditures for a year that exceed $250 but that do not exceed $10,250.

Basis of Stock in an S Corporation

In a C corporation, a shareholder's basis in his or her stock is generally its cost. However, in an S corporation, items of income taxed to shareholders increase their basis, while distributions decrease their basis.

If You Cannot Pay Your Taxes - An Overview

You prepare your tax return, and you discover that you did not have enough taxes withheld from your wages. You owe a substantial amount to the Internal Revenue Service, and you cannot make the required payment. What happens? You should file your return in a timely manner even if you cannot make the full payment. This action will prevent the imposition of late filing penalties. The IRS will send you a bill, which the formal start of the collections process. The bill will include information about the reason for the liability, the added penalties and interest, and the total amount due.