There's something frightening about tax debt: it accumulates quickly, and it can be hard to determine where it comes from. A business can also face serious financial problems if it does not address the issue. We will explain why you are behind on your taxes as soon as you contact Emergency Accounting.
Most often, it comes down to one of these five factors:
Tax Returns That Are Not Filed
Non-filing of tax returns is a common cause of tax debt for business owners. An unfiled tax return may result in penalties and interest charges, which turn the debt into a snowball rolling down the hill. Long-term debt accumulation can only be achieved by ignoring it.
A business's tax return must be filed on time regardless of whether it is able to pay the full amount owed. Payment plans and other options are available to businesses who are unable to pay their taxes in full at the time of filing. Additionally, if your business faces financial strain, you might be able to negotiate a debt reduction. Only by not ignoring the debt and dealing with it immediately will you be able to achieve this.
Underreporting Income
Underreporting income can lead businesses to accumulate tax debt in addition to underreporting income. Often, businesses fail to report all of their sales or take deductions that they are not entitled to. In addition to penalties and interest charges, underreporting income can have serious consequences, including legal action.
Maintain accurate records of all income and expenses for your business to ensure that you are reporting your income correctly. The business should know the tax laws and regulations that apply to their business and should talk to EPAS instead of guessing if they have any questions.
Employees Classified Incorrectly
In addition, misclassifying employees can result in businesses incurring tax debt. Independent contractors may not be taxed appropriately if they are classified as employees by the company. Penalties and back taxes may be imposed on the business by the government.
Employers should know how to determine whether a worker is an employee or an independent contractor to avoid misclassifying them. Employers should keep accurate records about workers' status and pay them appropriately according to their classification. Please contact the EPAS team with any questions you might have about this.
Taxes Not Paid On Payroll
Regularly withholding payroll taxes from employees' paychecks and paying them to the government is a requirement of businesses. Business owners who fail to comply may be liable for substantial tax debt.
In case your business is having trouble paying payroll taxes, we invite you to speak with the team at EPAS. As part of our auditing services, we will determine what payroll tax issues you are experiencing, as well as how to resolve them. We will also negotiate on your behalf with the ATO to resolve your growing debt.
The GST Has Not Been Paid
A business that sells goods or services may be required to collect GST from its customers and remit it to the government. The company will be liable for the debt if it fails to comply.
Ensure your sales records are accurate and you collect the appropriate amount from your customers to avoid the ATO investigating your business. The Australian Taxation Office must receive GST taxes on time.
Tax debt is an avoidable expense that could seriously damage your business in today's economic environment. Maintaining accurate records and avoiding accidentally using your tax reserves for cash flow are important for maintaining a strong position for your business.
You can contact EPAS if you have any concerns about your tax debt and business health. When we get started working with you as soon as possible, your business will recover more quickly, and you will feel more at ease.
Related Blog: Why Does Tax Debt Occur?
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