As California business-ownersdeal with daily operations, the last thing they want to face is tax fraud. Fortunately, they can follow good business practices to avoid severe legal trouble. Read this guide on how to avoid tax fraud for beneficial advice.
What Is Tax Fraud?
“Tax fraud” is an umbrella term that refers to a taxpayer purposely intending to defraud the government of money by failing to pay the tax amount they owe. Tax law is complicated, but business-owners must navigate it to ensure no legal trouble. The following points are some ways that California business-owners can avoid tax fraud.
How To Avoid Tax Fraud
Accurately File Taxes
The best way to avoid tax fraud is by accurately filing your business’s taxes. Withholding the correct amount of employee income, filling out documents with accurate information, and submitting important forms to the IRS can help business-owners avoid trouble. In addition, accurately filing taxes is one way to mitigate the risk of an EDD audit, which could hold business-owners liable for various fines.
Claim the Right Deductions
Another way California business owner can avoid tax fraud is to claim the right deductions. Though business-owners can deduct job-related business expenses, it’s important to make sure they deduct only necessary items. Claiming deductions such as personal trips, groceries, or anything non-business-related can lead to problems around tax time.
Select a Trustworthy Tax Preparer
Select a trustworthy tax preparer, because they will have access to your private financial information. And unfortunately, some tax preparers can follow fraudulent practices that trick business-owners into claiming credits or deductions to which they’re not entitled. Essentially, fraudulent tax preparers do this to increase their own fees. And if the IRS has suspicion that you were “in” on the bad practices, they can take serious legal action against you.
Create a Checks and Balances System
A checks and balances system is essential to keep accurate records of finances, supplies, and inventory. Having more than one person (or automated system) keeping tabs on bookkeeping and finances helps businesses hold themselves accountable with minimal errors. Payroll accounting software can accurately track activity and alert business-owners to errors before they become more significant issues.