The Two Taxes That Can Put You Out of Business

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Take a minute and imagine this. You have a small, local store, stocked with merchandise. In this case, it’s a health food store/metaphysical book store. (Okay, maybe a bit of a stretch, but stay with me.)

You have a bookkeeper who takes care of paying your bills, doing the payroll for you and your spouse and your two other employees. You go to a local strip mall-type franchise tax return preparer to get your taxes done each year.

You make a little money and you love what you do.

Then, early one morning and you’re just opening the store, you see big SUVs pull up and block the path to your door. You still have the door locked because it’s a little early. A group of guys storm out of the SUVs and grab a battering ram to slam in your front door.

They storm through the door with guns drawn and order you against a wall.

And that all happened because your bookkeeper ignored a notice from the IRS.

But it wasn’t an income tax penalty, which would have required a whole series of notices, notice of attempt to lien and then “merely” a lien or freeze on your bank account. Nope.

Miss this notice and you have a pseudo-SWAT team taking down your business. The local news picked up the story (which happened in Reno, NV) and showed pictures of the little shop after the raid. It looked like a bomb had gone off inside it.

So what was the tax notice that the bookkeeper hadn’t handled? It was payroll taxes.

I never did hear the rest of the story. It could have been a mistake by the IRS or, more likely, a mistake by the bookkeeper. And because she didn’t want to get in trouble, she never told the owner. But she also just ignored the notice.

Payroll tax penalties and notice of non-payment are taken much more seriously then any other type of tax due. ALWAYS pay attention to those notices. I won’t say that you’ll get your door broken down, but regardless you want to make sure these are handled right! Failure to pay payroll taxes will put you out of business fast!

There is another type of tax that you need to be very careful of – sales tax. This one is even trickier because every state has their own definition of what is taxable, how nexus is determined and how much the tax rate is. In fact, you can get into trouble with two states laying claim to the same sale. They can’t work it out – so they’re going to want you to collect and pay both! (Try explaining that to your customer)

I think the US Supreme Court is going to have to work this one out. Meanwhile, though, your business is at risk of being shut down by one or more states if you don’t follow their differing rules.

There have been a lot of changes this year in tax law, at both the federal and state level. Please join me for my July 25, 2009 teleseminar “Opportunities and Pitfalls in 2009 Tax Law Changes”. It’s FREE! but you must register now to get in on the call. DianesSeminars

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