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Know tax fact from fiction to save your business money

Budget pressures are being felt everywhere. The implication of that in terms of taxes and the collection of them, according to a recent study by Syracuse University, is that there are fewer IRS actions being pursued against larger corporations than there used to be.

That might be good news for some companies. But as is widely known, it is small businesses and smaller corporations that are the bedrock entities of the economy in Minnesota and the rest of the country. The Syracuse study doesn't shed much light on what's happening to those firms.

With tax season hard upon us and filing deadlines looming, it seems like this might be a good time to examine some of the common misconceptions about reporting requirements. Knowledge is power, so they say, and hopefully having the right information now will stave off costly noncompliance mistakes later.

  • Filing Form 1095 on the Affordable Care Act: Some may believe they don't have to cover this base just yet. The truth is that filing for the 2015 tax year is required.

  • 1099 reporting can be skipped if no state taxes were withheld: Some states allow this. Some do not. If you aren't sure, consult with your tax attorney.

  • Ink color doesn't matter: If you're filing a Copy A form 1099 make sure it's in red dropout ink. Failure to do so means it might not be properly processed.

  • Filing the ACA 1095 form is about how many full-time workers I have: It's about how many full-time equivalent employees you have. There's a big difference. If you have 50 or more FTEs you must file.

  • Independent contractor classification is about them having freedom to act: If you control what will be done and how, that worker is an employee and misclassification is a major red flag these days.

  • Electronic filing thresholds are the same for state as for federal: They can differ. It depends on the laws of your state.

These are only some of the things businesses need to be aware of to avoid tax disputes. To learn more, you'll want to speak with an experienced attorney.

Source: AccountingToday.com, "IRS Business Audits Plummet Due to Budget Cuts," by Michael Cohn, March 16, 2016

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