Here is tax news you can use….

It seems not a day goes by when a potential new client comes to us with a penalty notice from a state.

In about 90% of these cases the situation is similar to this:

The company registered with the state to collect sales tax or payroll withholding taxes. Then for some reason had a change in plans and did not have any payroll or sales tax obligations. Since they did not have an obligation the owner(s) of the company understandably never filed a return…

Here is where the problem that comes about. Unless notified otherwise the state still believes you have an obligation. There is no uniform policy and every state has a different approach. In the friendly states they will send you a letter notifying you of the non-filed returns. Sometimes these can be corrected by a phone call or simple letter. In the non friendly states they will send you a notice that they estimate your liability to be $x,xxx.xx and then add a penalty and interest amount to that estimated number. The penalties vary by state but can range from $50 to $1,000(per return).

If you receive these notices, deal with them right away. If ignored, the states will eventually refer these delinquent accounts to the state attorney general who will file a lien against you personally and then seek to encumber any bank accounts or property you may have. All this may happen without your knowledge! Trying to unravel these situations is a complicated and not a guaranteed process. In most cases you will get the estimated tax liability removed but not the penalties.

Written by John M Matras CPA

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