Small-business owners who
work hard to ensure they’re following sales and use tax regulations could still
let something slip through the cracks. Rates and rules are almost impossibly
complicated—and they constantly change.
In the event you’re
audited and a problem is discovered—a missing exemption certificate, incorrect
rates or a segment of unreported sales—the required back-payments and penalties
could crush a small business. And these expenses would be in addition to
charges incurred just to manage the audit.
While it may be tempting
to succumb to panic, it’s important to stay calm and evaluate your options with
a clear head:
1.
Determine
if your business can absorb the expense and maintain a healthy operational
cash flow. Your best option may be to pay what’s owed out-of-pocket.
2.
Consider
making payments if you don’t have the money to support a lump-sum payment.
“You can pay back in increments but you need to keep in mind, the rates [of tax
authorities] are going to be the highest rates out there,” said Sonya Daniels,
manager at accounting firm CBIZ MHM. Daniels often advises clients to find
financing through banks or other alternative means; rates will be lower and
you’ll avoid getting a lien placed on your business.
3.
A
tax lawyer is also an option. “Depending on the bill the auditor hands
you, you might consider paying it if it’s relatively small in comparison to the
legal hassles and lawyer bills you may incur. Don’t just give in and pay if the
bill is significant,” said Andy Curry, a business author and television
contributor, as well as owner/manager of several small businesses.
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