Imposing taxes is crucial since it funds government programs and allows for economic growth and improved living standards. The Internal Revenue Service has instituted these stringent measures to ensure that everyone pays their fair share of taxes. In fact, the IRS routinely conducts tax audits in an effort to reduce fraud by watching for indicators of wrongdoing, particularly in the business sector. Incorrectly filed taxes, large or inconsistent deductions, and income that is either not declared or reported incorrectly are all warning flags.
If a company discovers it has unpaid taxes in the past, it may choose to come clean about it voluntarily. Taxpayers that proactively prepare for audits may be able to reduce their liabilities, look-back periods, penalties, and interest charges.
Remember that a company has two options for responding to a sales tax audit notification from the Internal Revenue Service. The primary course of action is to relax and let the auditors do their thing. You can also take preventative measures by hiring a tax adviser to help you defend your company's sales tax practices in the event of an audit.
Given the auditors' likely decades of knowledge, the first approach could put many business owners at a disadvantage. As an added downside, conducting an audit without expert assistance can be disruptive to corporate operations and time-consuming. State auditors may use any means necessary to achieve their primary objective, which is to increase tax income for the state.
In contrast, a tax audit defence specialist will begin with a pre-audit risk assessment if you choose the second choice. Therefore, the consultant will search for typical problems with sales tax audits that can be detrimental to your company. The failure to collect sales tax on taxable sales and the failure to pay tax on taxable purchases are two of the most common areas for examination in a sales tax audit.
The most prevalent causes of unpaid tax obligations are the absence of required documentation, such as resale or exemption certificates for sales transactions, the owner's failure to recognize the company's reliance on state sales tax laws, and the application of outmoded tax regulations.
On top of these benefits, working with a tax consultant to defend your sales tax audit is another reason to hire one.
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