Tax Penalties Your Small Business Should Watch Out for—Part 3
Last Updated April 14, 2023
In the last two blog posts (Part 1 and Part 2), we have talked about six different types of tax penalties that any small business could face. Here, we will conclude this topic by discussing the remaining tax penalties.
Table of Contents
Non-Medical Distribution Penalty
If your employees have health saving accounts, then make sure that they are only being paid for the payment of medical expenses. Otherwise, you and your employees can be subjected to the penalty consisting of 20% the spent amount. Go through IRS publication 969 or work with the experts of tax preparation firm in order to restrict dismemberments to only qualified medical expenses.
However, any employee more than 65 can use health savings accounts for the payment of non-medical expenses as well.
It is important to mention here that the IRS also punishes the individual and businesses for their poor accuracy in the filing of the tax returns. Even if you are making an honest mistake, you can be subjected to the IRS’s wrath. You might have to 20% extra than the actual amount if you have committed any accuracy-related error in the filing.
This again underlines the importance of hiring a professional online bookkeeping firm. They have the training and experience to take care of every single digit in the tax filing without making an error.
How to Avoid Tax Penalties
All the tax penalties that we have discussed in these three blogs have pointed out one thing i.e. it is important to get the services of professional bookkeeping and tax preparation firms no matter what’s the size of your business. However, it is possible to get around tax penalties if you are dealing with the filing on your own by taking care of these things.
Always Stay Ahead of the Deadline
You have to proactively work to make sure you are not missing any filing deadline. Whether its form 1099, form W2, or your corporate tax return, make sure you are aware of all the deadlines. Filing tax returns within the prescribed time will save from considerable losses that are easily avoidable.
Prepare with the Numbers
You can only file the returns within the time if you are readily available with all the relevant numbers. Make sure you have someone within the company who is good with numbers. If that’s not the case, then you can hire the expertise of an online bookkeeping firm without spending much.
With timely financial statement preparation and through good bookkeeping practices in place, your small business can easily comply with tax provisions of the IRS without facing penalties.
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