As we enter the tax filing season, business owners across the country are busy harmonizing their papers to make their tax filing process as seamless as possible. But for thousands of these business owners, this might mark yet another frustrating season as the IRS grapples with a backlog of unprocessed tax returns from as far as 2020.
The IRS Commissioner Charles Rettig has already warned Americans to expect inevitable delays due to staffing issues exacerbated by the Coronavirus, lack of congressional funding, and ongoing implementation of several new stimulus programs. Besides, the agency is also implementing significant tax code changes in the midst of a busy tax season, leaving many taxpayers in limbo.
As a business owner, you must put measures in place to help you deal with these delays. Let’s look at some of the things you can do to best navigate this challenge.
Plan Ahead to Get Ahead of the Delays
The initial step is to plan ahead. This means that you should start planning and organizing your records now in order to be ready when it’s time to file your year-end taxes. A delay of one or two weeks in the filing process might not cause much stress if you already have all of your information lined up and organized.
It’s important that you work with a tax expert who’s already familiar with your business. Be sure to include all eligible deductions that you can since the IRS is scrutinizing these claims more closely this year. It’s also important to keep in mind that filing for an extension might not be advisable for active businesses – your return could face further delays if it isn’t filed on time.
File Early and On Time
The most direct and effective way to get past the IRS backlog is to file your taxes as soon as possible. Even though you might be tempted to delay your tax filing until the very last minute, doing so will only make matters worse for everyone involved.
File your tax return well in advance of the deadline and finalize a plan to meet your filing needs well before the dreaded date. If you are not in a position to file, be sure to request an extension and avoid paying penalties.
Of course, filing quickly means having all information regarding revenue, expenses, and applicable credits ready to roll once filing opens.
Open a Direct Deposit Account for Refund Checks
The IRS is encouraging all taxpayers to open an account at the agency’s portal since processing times for electronic filings are faster than when returns are filed via mail. Paper filings will continue to be accepted, but they’re likely to face further delays due to the agency’s workforce shortage.
Having an online account with the IRS ensures that your refund can be sent directly to the bank account of your choice. This is faster, more secure, and trackable, making it easier for taxpayers to keep track of the status of their returns.
According to the agency, sending a paper return exacerbates the delay since it has to be pulled from the stack and processed manually, which can take weeks or more. Besides, waiting for a refund check to be delivered via mail can be a slow and frustrating experience. Your check may even get lost or stolen.
Integrate Tax Software into Your Business Processes
Another way to ensure faster filing and receipt of your return is by integrating tax software into your business processes.
There’s a wide array of such applications that can help you manage the entire process without any manual errors or omissions. This technology also allows you to keep track of all transactions and easily report on them at the end of the year.
Most tax software is available in both online and offline formats, so you can easily pick the one that works best for your business needs. Some applications come with audit protection features, which can help protect you from costly mistakes or oversights when filing your returns.
Don’t “Guesstimate” on Your Filing
Guesstimating your tax filings is always a bad idea, especially with the ongoing IRS delays. Remember, the IRS counter checks the details on your returns against their figures. If there’s a discrepancy, it may take longer for your return to be processed.
In order to speed up the filing process and avoid delays, make sure to have all of your documentation lined up before you file. This way, even if something doesn’t match exactly as you’ve filled out online or on paper – any issues can be resolved quickly.
Avoid Making Unnecessary Inquiries
You might be tempted to contact the IRS in case of a delay. It would help if you didn’t do so since it will only result in further delays as these inquiries have to be processed manually. Avoid calling the agency’s toll-free number since this may not yield much. Due to staffing issues, the agency is operating at a 5% level of service, which cannot handle the millions of calls coming from taxpayers.
If you want to make a follow-up, consider reaching out to the Taxpayer Advocates since they are more likely to expedite your case. Alternatively, you can look up your issue on the rich online resources provided by the agency and always check the status of your refund by logging into your account at the IRS website.
What’s Next?
The IRS has indicated that the delays experienced last year may spill over this year. As a business owner, it’s important to be aware of these IRS delays and take steps now, so you get your refunds in good time. By following the above steps and strategies, you can avoid an audit and get your refund as soon as possible.
Want to protect your bottom line? Watch this tax incentive webinar recording to learn about the latest changes and deadlines for filing, reporting, and paying taxes as a small- or medium-sized business.