When you’re a small business owner focusing on providing quality products or services to your customer base, it’s easy to lose track of some of the things that aren’t done on a regular basis. For many business owners, this means falling behind on taxes.
Emotions on the subject can vary quite a bit. Over the past several decades, we’ve seen a varying amount of worry from the small business owners we’ve talked to. Some are worried because they don’t know what consequences they could be facing - for others, not knowing the consequences is the reason why they haven’t started worrying yet.
That doesn’t mean they’re aware of the advantages of being up-to-date with their taxes, though. We make it our job to inform business owners of the positives as well.
In this article, we’ll discuss:
What back taxes are and how they accumulate
The consequences of not filing previous years’ taxes
The advantages of staying up-to-date with your taxes
What CSI Accounting & Payroll does with back taxes
What Are Back Taxes?
When you have not filed previous years’ worth of tax returns, they need to be resolved to make sure your accounting information is accurate. When you come on board with a new accountant, they will refer to your years of missed taxes as “back taxes”, meaning they will have to “go back” to fix the unfinished work before they can accurately move forward.
In accounting, minimizing tax is the ultimate goal, and bookkeeping is how we get there. Prior numbers build on themselves. An accountant can’t snap their fingers and know what numbers to use on your old tax returns; they need to go back month by month to uncover the correct numbers. The IRS will dig deep into your finances in the case of an audit, so if you’re just picking numbers and “plugging them in” to avoid having to do all of your years of back taxes, you can find yourself in a big mess.
Oftentimes, small business owners fall behind on tax returns because they are worried about filing them incorrectly. Maybe there is confusion about the process, you don’t have an accountant yet, or you are afraid of getting a big tax bill and being unprepared for it. It could even just be as simple as not being top of mind for you - especially with all of the other things that you need to focus on daily. We’ve seen it all before!
Consequences of Falling Behind on Taxes
This is the part that causes real concern. Many business owners simply don’t know what they don’t know - and sometimes that makes procrastination seem like the simpler option. However, consequences for not filing your tax returns can range in severity quite a bit based on the time passed and the amount you owe. Here are some examples:
The earlier you file your taxes, the faster you get your refunds! What if you owe money? In that case, you can avoid the consequences listed above.
Not to mention, you’re less likely to be audited by the IRS - who doesn’t want to avoid that headache? If you file your tax returns, the IRS only has three years to review them in an audit, but if you don’t file them, the statute of limitations never ends.
Yes, CSI Accounting & Payroll will file multiple years of back taxes for you at once when you come on board as a client. In fact, we require it. If your taxes are not up-to-date, then your accounting won’t be accurate. We want to provide a quality accounting service for you in the future, so we will need to start with a clean slate.
How Long Does It Take CSI to File Back Taxes?
If you’re behind on your taxes, don’t worry - we won’t judge. We have had clients with as many as 10 years of back taxes to file before. Your situation can be greatly improved in a matter of a couple of months. For smaller projects, we aim to get back taxes done in two to three months, whereas our 10-year project took us about six months.
Of course, this timeline depends on how quickly you can provide us with the information we need, as well as how many other clients are onboarding at the time or if we are busier than usual for tax season. In the meantime, we can start working on some of your current accounting, but we can’t produce any financial statements for you until the back taxes are filed.
Does CSI Charge Extra to File Back Taxes?
Yes, CSI does charge extra to file your back taxes. Each month that we need to go back and work on will cost you the same as a normal current month of accounting work.
What About Back Taxes For Payroll?
Back taxes for payroll are very similar to back taxes for accounting. We do those too! If you’re doing payroll yourself, you need to be paying taxes and filing returns. If you or a payroll specialist haven’t done this, you’ll need to get your payroll back taxes done. This is not as common of a problem as falling behind on back taxes for accounting.
If you’ve fallen behind on payroll taxes, we’ll need to rebuild your data in our system as if we did your prior payrolls. And if you’re in Minnesota like we are, we’ll need to make up for a minimum of 14 returns per year! (For those of you who are counting, that’s three tax filings per quarter, plus year-end W2s and the annual federal unemployment return.) Other states may have a different number of returns per year.
Our software helps us file your old returns. Plus, when we make amendments to your W2s, we can print them out and have the final product in your hands as soon as they’re done.
Resolve All of Your Back Taxes This Year
Whether you fell behind on taxes because you were worried about filing incorrectly or your hands were full of daily tasks, you should now have the knowledge and confidence to have an accountant resolve the issue.
The experts at CSI Accounting & Payroll do this all the time, and we’re happy to help you start your monthly accounting journey with a clean slate! Click the button below to schedule a free consultation!
This article was composed by a member of our staff who interviewed our experts to get the facts straight. Any uncited information found here came straight from a knowledgeable accountant or payroll specialist.