Tax

Accounting Business Tax

Advantages of Keeping Good Records

You can avoid headaches at tax time by keeping track of your receipts and other records throughout the year. Good record-keeping will help you remember the various transactions you made during the year, which in turn may make filing your return less, well, taxing.

Records help you document the deductions you’ve claimed on your return. You’ll need this documentation should the IRS select your return for examination. Normally, tax records should be kept for three years, but some documents – such as records relating to a home purchase or sale, stock transactions, IRA, and business or rental property – should be kept longer.

In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return:

  • Bills
  • Credit card and other receipts
  • Invoices
  • Mileage logs
  • Canceled, imaged, or substitute checks or any other proof of payment
  • Any other records to support deductions or credits you claim on your return

Good record-keeping throughout the year saves you time and effort at tax time. For more information on what kinds of records you should keep, call our office.

Tax

Late Filing Penalties for S-Corp, Partnership Returns

Penalties for S-Corps, Partnerships, and Fiduciaries failing to file returns have been steadily rising, but starting in tax year 2010 penalties for S-Corp, Partnership, and Fiduciary filing late returns increased to $195.

The IRS states that for returns on which no tax is due, the penalty is $195 for each month or part of a month (up to 12 months) the return is late multiplied by the total number of persons who were shareholders in the corporation during any part of the corporation’s tax year for which the return is due. The penalty may also be charged if the return does not show all the information required.

For example, if a S-Corporation fails to file its 2010 return (including a Schedule K-1 to each shareholder) on time the penalty could be as much as $2,340 per shareholder per year ($195 per shareholder for the maximum of 12 months).

These failure-to-file penalties do not include tax that is due or penalties for tax that is due, but not paid on time. Add in the fact that the penalty isn’t tax deductible on your tax returns the following year and you’ve got yourself a double whammy.

If the partnership or S-corporation can show that the failure to file on time was due to “reasonable cause”, the IRS might provide relief. Be advised however, that if the partnership or S-corporation has established a pattern of failing to file in the past, it’s unlikely that the IRS will be sympathetic.

Why take a chance? If you need assistance filing your S-Corp, Partnership, or Fiduciary return, call us today.

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