There\'s something frightening about tax debt: it can accumulate quickly and it\'s often hard to figure out where it came from. Business can also face serious financial problems if it is not addressed. When you come to Emergency Accounting, one of the first things we\'ll do is explain why you\'re behind on your taxes.
It usually boils down to one of these five causes:
The Failure to File a Tax Return
Business owners commonly accumulate tax debt by not filing their tax returns. Failure to file a tax return may lead to penalties and interest charges, which turn the tax debt into a snowball rolling down the hill. You will only grow further in debt if you ignore it for a long period of time.
Regardless of whether businesses are able to pay the full amount owed, it is important for them to file their tax returns on time. Businesses who are unable to pay their taxes in full at time of filing can take advantage of ATO payment plans and other options. You may also be able to negotiate a reduction in debt if your business would face financial strain. You can achieve this, however, only if you don\'t ignore the debt and deal with it immediately.
Income Underreporting
In addition to underreporting income, businesses can accumulate tax debt through underreporting. In some cases, businesses do this by failing to report all of their sales or taking deductions they are not entitled to. There is a dim view of this by the ATO, and underreporting income can have serious consequences, including penalties, interest charges, and legal action.
Business owners should keep accurate records of all income and expenses to ensure that their income is reported correctly. It is important for the business to know the tax laws and regulations that apply to their business and, if they have any questions, they should talk to EPAS instead of guessing.
Incorrect Classification of Employees
It is also possible for businesses to incur tax debt as a result of misclassifying employees. The company may fail to withhold the appropriate taxes from its employees\' pay checks if it classifies them as independent contractors. The government may then impose penalties and back taxes on the business.
Businesses should understand how to determine whether a worker is an employee or an independent contractor in order to avoid misclassifying them. In addition to keeping accurate records of the workers\' status, employers should also pay them appropriately according to the workers\' classification. Any questions you might have about this should be directed to the EPAS team.
Payroll Taxes Unpaid
Businesses must withhold payroll taxes from their employees\' paychecks and pay them to the government on a regular basis. The business may be saddled with substantial tax debt if it fails to do so.
We encourage you to speak to the team at EPAS if your business is having trouble paying payroll taxes. We will audit your business and determine how to resolve payroll tax issues, and we will negotiate with the ATO on your behalf to resolve your growing debt.
GST Unpaid
GST may be collected from customers and remitted to the government by businesses that sell goods or services. If the company fails to do so, the debt burden will fall on them.
Maintain accurate sales records and collect the appropriate amount from your customers to avoid having the ATO investigate your business and find discrepancies. GST taxes must be filed with the Australian Taxation Office on time.
The current economic climate makes tax debt an avoidable expense that can seriously damage your business. In order to maintain a strong position for your business, you should keep accurate records and avoid accidentally using your tax reserve for cash flow purposes.
Contact the team at EPAS if you have any concerns about your tax debt and business health. Your business will recover more quickly, and you will feel more at ease, the sooner we get started working with you.