When the word “compulsory” is used when talking about taxes, it has two different meanings. For individuals, compulsory filing of income tax returns means that all who meet certain criteria are required to file a tax return. This informs the government of the total income you earned in a certain year and that you have paid the required taxes on it.
Not everyone is required to file an income tax return every year, however. There are thresholds based on your filing status, type of income, and your age. This interactive questionnaire from the IRS can help you determine if you are required to file a tax return.
The term “compulsory tax,” on the other hand, applies to employers and means something different.
What Is Compulsory Tax?
Compulsory Payroll Tax is a tax collected from paychecks by the government to fund specific programs, like social security. The collected taxes then go to funding different benefits packages for retirees, disabled persons, and children of workers who are deceased.
Employers withhold these taxes from employees’ paychecks as a requirement by law. There are regulations around the compulsory filing of income taxes that can be difficult to understand unless you’re in the tax world. To ensure you don’t make a mistake that could come up in a compulsory tax audit, seek the help of a tax professional, like those at Tax Help MD.
Compulsory Tax Audit
As an employer, you may be subject to a compulsory tax audit, which is where your account books are reviewed by a specialized accountant who reports to the IRS. There are different tiers when it comes to these audits, and different qualifications related to a business’s profits, gains, and losses.
The books must be in order, and a business must have a compulsory tax audit done by an accounting and tax professional before a certain date, or late fees and penalties will be given out. Penalties range, with one being .5% of total earnings and sales for the previous calendar year. The IRS might order a compulsory tax audit if they find even the slightest of errors in the taxes filed by the business. Having an expert, like Tax Help MD, at your side can help you avoid being a compulsory tax audit.
Choose the Experts at Tax Help MD For All Your Tax Needs
When filing income taxes or taking care of payroll taxes, a complete understanding is essential. The last thing any business, organization, or individual wants is to give the IRS any reason to order an intensive audit due to their time-consuming nature. If you want to know if you have to file a tax return or have been disorganized in the past with your books and other accounting measures, calling a tax expert and discussing your concerns can help save you some headaches. To make sure you’re doing everything the correct way, hire a professional like Tax Help MD that can help you with all your tax needs.