What Should I Do if I Improperly Claimed Small Business Deductions on My Federal Return?

If you improperly claimed small business deductions on your federal return, you will want to correct your mistake before the IRS opens an audit or investigation. What this entails depends on the specific circumstances. To make an informed decision about how best to proceed, consult an experienced New Jersey small business tax attorney promptly.

While several federal tax deductions are available to small businesses, small business owners can only claim the deductions for which their businesses qualify. Improperly claiming small business deductions can create additional liability and is a common trigger for IRS audits.

As a result, if you improperly claimed small business deductions on your federal return, you should act promptly. Learn about some of the options you may have in this scenario from New Jersey small business tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group:

What Are the Options for Correcting Improper Small Business Deductions on a Federal Return?

When small business owners improperly claim tax deductions on their federal returns, the best path forward depends on a careful assessment of the circumstances—and risks—at hand. For example, some key considerations in this scenario include:

• Did you commit a single error or multiple errors? One-off errors generally carry less risk than multiple errors or repeatedly committed errors.  
• How significant is the error? Errors with minimal tax consequences generally carry less risk than errors that result in substantial underpayments.
• Was the error inadvertent or intentional? Inadvertent errors can trigger liability for back taxes, interest, and penalties, while intentional errors can create exposure to criminal charges.
• Has the IRS already opened an audit or investigation? Once the IRS opens an audit or investigation, options that might otherwise be available can go off the table.

Depending on these (and other) factors, small business owners will have different options for coming into compliance. For example, provided that the IRS has not yet opened an audit or investigation, potential options in this scenario may include:

• Submitting an amended return
• Submitting a voluntary disclosure
• Submitting an offer in compromise (if necessary)
• Seeking a settlement or installment agreement (if necessary)

Submitting an amended return and submitting a voluntary disclosure are very different ways to come into compliance and carry different risks. As a result, before you decide to move forward, consult an experienced New Jersey small business tax attorney who can help you decide how best to proceed.

How New Jersey Small Business Tax Attorney Kevin E. Thorn Can Help

At Thorn Law Group, we help small business owners and other clients proactively resolve complex IRS tax issues. We also represent clients in IRS audits and investigations when necessary. If you improperly claimed federal tax credits on your small business tax returns, we can work with the IRS on your behalf to help secure a favorable resolution.

Contact Us for a Confidential Consultation Today

If you want to discuss your options with an experienced attorney, contact us. Call 201-842-7696 or tell us how we can reach you online to schedule an appointment with Kevin E. Thorn, Managing Partner of Thorn Law Group, a New Jersey small business tax attorney.