IRS woes

Missed the Tax Deadline? Getting Your Business Back on Track

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Falling behind on tax filings can quickly put your business on the IRS’s radar.

Whether due to financial constraints, staffing shortages or organizational transitions, missing even a single filing deadline can make your business vulnerable to penalties, interest charges and potential compliance investigations that can impact your company’s financial health and reputation.

With a practical strategy in place, you can help mitigate any damage — before it’s too late. Keep the following tips in mind:

Time is not on your side. When addressing unfiled business returns, urgency is key. IRS failure-to-file penalties accrue at five percent of unpaid taxes per month, capped at 25%. And failure-to-pay penalties add 0.5% per month, also maxing out at 25%. The compounding result? A $10,000 tax liability that can add up to over $15,000 in just 24 months.

Plus, the statute of limitations for IRS assessment (typically three years) doesn’t begin until returns are filed, creating unlimited financial exposure that hangs over your business.

Voluntary disclosure is your best strategy. Don’t wait for the IRS to find you. Taking proactive steps to file back returns allows you to:

  • Maintain control over the narrative and presentation of information
  • Demonstrate good faith compliance efforts
  • Potentially qualify for penalty abatement programs

There are tactics to tackle documentation challenges. Reconstructing financial records for past periods can be daunting. Remember that the burden of proof falls on you as the taxpayer, so the more documentation you can provide, the better.

Start by:

  • Gathering all bank and credit card statements for the unfiled years
  • Collecting available expense receipts and income documentation
  • Securing prior year depreciation schedules if applicable
  • Retrieving copies of previously filed returns for context

Your catch-up approach matters when facing multiple unfiled years. Has your business gone multiple years without filing? The good news is that you don’t need to file everything simultaneously to catch up.

Consider these approaches:

  • Most recent return first: Filing current year returns establishes compliance going forward while you address back years.
  • Refund years first: If you’re expecting refunds, prioritize years still within the refund statute (generally three years).
  • Highest exposure first: Address years with significant tax liabilities to minimize ongoing penalty accrual.

The most important thing is to take action now. Each day that passes potentially increases your tax liability through additional penalties and interest.

 Looking ahead

After resolving your back tax issues, ensure your business remains in good standing by taking preventive measures to keep your tax compliance on track.

  • Schedule quarterly financial reviews with your team and accountant to identify potential issues early
  • Establish estimated tax payment schedules to avoid underpayment penalties
  • Develop document retention policies that support future compliance
  • Consider outsourcing tax compliance functions

At Magone & Company, we provide expert support and solutions to help you navigate complex tax laws, identify deductions and credits, minimize penalties and interest, and create systems to prevent future compliance issues. Don’t hesitate to reach out at (973) 301-2300 to schedule a no-obligation, confidential consultation.

 

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your unique circumstances

 

 

The New Tax Audit Landscape: Protecting Your Financial Future

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With advanced technologies and stricter compliance standards, tax audits are evolving. And as a result, they’re transforming how individuals and businesses approach their financial reporting.

Navigating today’s audit landscape requires vigilance and strategic planning. Here are five risk factors — and mitigation tips — to plan for:

High-income earners
Complex financial portfolios present more opportunities for potential tax discrepancies. That’s why tax authorities are focusing on high-income earners.

To combat this trigger, impacted individuals may consider:

  • Implementing a multi-layered verification process for all income
  • Creating a robust digital filing system for financial records, including back-up copies of all critical financial documents
  • Collaborating with tax professionals that specialize in high-net-worth financial management

Tax return errors
From simple miscalculations to complex reporting mistakes, the IRS is zeroing in to reduce errors and close tax gaps. The most common errors include incorrect Social Security numbers, mismatched names, math mistakes and inconsistent income reporting across different forms.

Critical prevention strategies include:

  • Using official IRS forms and publications as reference
  • Maintaining updated records and accurate personal information
  • Addressing income or deduction inconsistencies quickly and proactively

Cryptocurrency transactions

Cryptocurrency and digital assets have created a challenging regulatory environment. As a result, the IRS is developing increasingly sophisticated mechanisms to track and tax these transactions.

How you can you build a solid defense?

  • Documenting every cryptocurrency transaction meticulously
  • Keeping a detailed transaction log with corresponding market values
  • Staying updated on emerging digital asset tax laws and regulations

Uncommon business expenses

Unusual business expenses may appear suspicious when they lack clear business purpose or blur the line between personal and professional spending. Entertainment costs, vehicle expenses, home office deductions and travel expenditures frequently raise red flags.

By making strategic moves now, you can prove the legitimacy of these expenses if and when an audit arises:

  • Meticulously documenting every expense and save all receipts
  • Creating a clear narrative of business purpose for each expense
  • Making sure expenses are proportional to business income and being prepared to provide a comprehensive explanation if audited

Deductions

Sizeable deductions can increase your chances of an audit — especially in 2025. A careful deduction management strategy requires substantiating, categorizing and defending business and personal expenses:

  • Understanding industry-specific standards and maintaining a comprehensive and organized record-keeping system
  • Ensuring that every claimed expense has a legitimate, verifiable business connection
  • Segregating personal and business expenses through dedicated financial accounts, keeping detailed receipts with clear descriptions

If there’s something that makes the IRS take a second look, an audit may be inevitable.

By staying informed, you can transform potential audit stress into a proactive tax strategy. Don’t hesitate to reach out to the tax professionals at Magone & Company for guidance.

 

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your unique circumstances.

IRS Dirty Dozen Watchlist: New Tax Scams for 2025

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Tax season offers taxpayers many opportunities for savings. But it also brings out the scammers and fraudsters hoping cash in on unsuspecting filers, outdated credits and more.

Every year, the IRS releases its list of the “dirty dozen” scams impacting taxpayers and business owners. To protect your bank account, identity and reputation, see what’s new to the watchlist for 2025:

Expired sick leave and family leave credits. One of the most prevalent scams of 2025 involves Form 7202, “Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals.” Many taxpayers are still attempting to claim this credit despite it only being available for self-employed individuals for tax years 2020 and 2021. Continuing to claim it on your tax returns will trigger IRS scrutiny and potentially lead to penalties.

The self-employment tax credit. A bogus self-employment tax credit is circulating and misleading taxpayers into filing false claims. This misinformation is often a twisted reference to the expired sick leave and family leave credits mentioned above, suggesting that self-employed individuals and gig workers can collect payments of up to $32,000 for the COVID-19 period. If you see social media posts or receive emails promoting this false credit, be aware that it’s a scam.

Fraudulent household employment tax claims. The IRS reports a disturbing rise in suspicious Schedule H filings. This scheme involves the creation of fictional household employees — nannies, housekeepers or caregivers — to claim refunds based on wages never actually paid. The IRS has sophisticated methods to verify employment records and will flag any Schedule H filings that don’t match other documentation.

The overstated withholding scam. There’s also an uptick in taxpayers (or preparers) submitting returns with grossly exaggerated income and withholding amounts to generate artificially large refunds. The IRS has enhanced its detection systems for this particular scam and warns that such claims will be closely scrutinized. If discrepancies are found, refunds will be withheld, and guilty parties may face penalties or even criminal charges.

Remember, if a tax credit or deduction sounds too good to be true, it probably is. When in doubt, consult a certified tax professional. The experts at Magone & Company are available to answer any questions.

To get up to speed with other dirty dozen scams to watch out for, check out The IRS’ “Dirty Dozen” — What Tops This Year’s List? part 1 and part 2.

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your unique circumstances.

How Tax Debt Could Impact Your International Travel Plans

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Gearing up for a summer getaway abroad? Before you head to the airport, be aware of a potential roadblock for delinquent taxpayers — passport problems.

In 2015, the Fixing America’s Surface Transportation Act empowered the IRS to inform the State Department about taxpayers with “seriously delinquent tax debts.” This information can be used to deny passport applications or renewals for individuals who owe a hefty amount to Uncle Sam. As of 2024, the “seriously delinquent” threshold stands at $62,000, including back taxes, interest and penalties.

So how can you help ensure you’re in your seat for takeoff?

Before the gate closes…

Affected taxpayers will receive written notice from the IRS outlining steps to resolve the issue.

Once the tax debt is settled, the IRS will reverse the certification within 30 days. The State Department also allows a 90-day period to make full payments or set up a payment arrangement before denying passport applications.

It’s essential to act promptly if international travel plans are on the horizon. Be sure to:

  • Pay the tax debt in full or set up a payment plan with the IRS to settle the debt in installments
  • Consider an Offer in Compromise (OIC)
  • Comply with a settlement agreement
  • Request a collection due process appeal or relief

An important reminder: The IRS will never call or email in an attempt to settle a tax debt, nor will they require payment via gift cards or other unorthodox means. Verify through official channels or contact your accountant or attorney for assistance to avoid falling victim to fraud schemes.

Departing on time

Whether you’re traveling for business or pleasure, don’t miss your flight due to delinquent taxes. By exploring these relief options and seeking guidance from a trusted tax advisor, you can navigate through challenges with a smoother landing.

Reach out to the tax experts at Magone & Company, or give us a call today at (973) 301-2300 for an evaluation of your tax situation.

 

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your tax situation.

6 Reasons the IRS Might Zoom in on Your Business’s Finances

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Did you know that something as simple as a math error or an unsigned form could invite unwanted attention from the IRS? Even if you have no intention to evade taxes or find loopholes, if there’s something on your return that makes the IRS take a second look, an audit of your business may be inevitable.

When it comes to dealing with the IRS, honesty is always the best policy. Learn some of the top audit triggers for businesses — and tips on keeping Uncle Sam at bay.

Excessive deductions. As a business owner, you’re entitled to deduct certain expenses to lower your taxable income. But don’t overdo it. If your deductions appear disproportionately high compared to your income, the IRS might suspect you’re padding your expenses. So what constitutes a legitimate business expense? The cost of goods sold, rent, salaries and business-related travel are generally deductible. The key is to keep accurate records of all your business expenses, making sure every deduction is backed by appropriate documentation like receipts, invoices or mileage logs.

Consistent business losses. It’s normal for businesses to experience losses, but reporting losses year after year can catch the IRS’s attention. They might suspect that your business is more of a hobby — and hobbies don’t qualify for business tax deductions. To avoid this trigger, you must be able to demonstrate what’s called a profit motive. For example, this could be a business plan indicating how and when you expect to become profitable, or records showing that you’re treating your business seriously by maintaining regular hours, keeping accurate financial records or investing in professional development.

Sizeable charitable donations. If you’re not generating a significant amount of income, any large charitable donations can raise eyebrows. Be sure to document every generous gift with related receipts and any supporting materials to help prove you have the best intentions. And remember, contributions must be made to qualified organizations that meet IRS guidelines for your business to claim a deduction.

Home office deductions. In the post-pandemic world of work, more people than ever are clocking in from home. But the IRS knows that even if you’re running your business from home a few days a week, that doesn’t mean you’ll necessarily qualify for the home office deduction. Do your due diligence and ensure your home office fits the bill as your principal place of business, meeting these IRS guidelines.

Large cash transactions. Dealing with wads of cash? The IRS is watching. The agency requires businesses to report cash transactions exceeding $10,000, and all businesses must comply with reporting requirements. It’s not just cash transactions that need to be reported. The rule applies to cash equivalents like cashier’s checks, money orders and bank drafts, too.

Personal use of a work vehicle. If you think you can pick up the kids at school or run errands in your business vehicle, the IRS may be on to you. You may derive tax benefits for your vehicle’s business use, but if you’re also using it for personal business, you’ll need to account for it on your taxes. Keep a detailed record of your mileage and gas costs pertaining to your vehicle’s usage. Keep a calendar to record the purpose and the mileage of each trip, every time you get behind the wheel.

As a business owner, your focus should be on growing your business — not worrying about an audit. Reach out to the CPAs at Magone & Company to ensure you’re on track for IRS compliance.

This information is provided for educational purposes and should not be construed as financial or legal advice. Please consult your accountant or attorney for advice specific to your situation.

No Harm, No Foul: New ERC Voluntary Disclosure Program for Impacted Businesses

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Did you file an Employee Retention Credit (ERC) claim in error? Mistakes happen. That’s why the IRS recently introduced a new Voluntary Disclosure Program aimed at helping businesses rectify erroneous claims and repay the funds.

The program is open through March 22, 2024, allowing employers to reimburse the IRS for 80% of the claim they received. Why 80%? Many ERC promoters responsible for leading small businesses astray charged a percentage fee at the time of payment, resulting in recipients never receiving the full ERC amount.

To apply for the Voluntary Disclosure Program:

You’ll need to file Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program, using the IRS Document Upload Tool. Additionally, if the ERC was claimed for any tax period ending in 2020, Form SS-10, Consent to Extend the Time to Assess Employment Taxes, must be submitted along with Form 15434.

Like most employers, you probably use a payroll company that reports, collects and pays employment taxes on your behalf. In such cases, the company — not you — must file Form 15434.

If a third party filed for the ERC on your behalf, they must complete Form 2848, Power of Attorney and Declaration of Representative.

Next steps:

If the IRS approves your application, you’ll be mailed a closing agreement. Repayment may be made online or by phone via the Electronic Federal Tax Payment System. If you’re unable to fulfill the required 80% repayment, the IRS may consider an installment agreement on a case-by-case basis, in which fees and penalties may apply.

Need an informed guide to navigate future situations like these — and protect your company’s interests? Reach out to the professionals at Magone & Company.