If you own a business in California, you know how much work it can be. You are in charge of everything from maintaining the premises, to payroll, to filing the taxes. While every detail that goes into running a business is important, making sure you are compliant when it comes to your taxes is especially crucial. If you are not, the state or the IRS will come after you.
Every year, 5 million businesses and other entities in California have their income records scoured by the state’s Franchise Tax Board. They are looking for any business that failed to file an income tax return or is noncompliant in some other way. According to the FTC, 90,000 businesses in our state did not file state income tax returns for 2011. Why there are so many is not clear, but not all businesses are required to file the tax return.
The Franchise Tax Board has given each of the 90,000 businesses that didn’t file a return in 2011 30 days to respond. Businesses must either explain why they are not required to file a state income tax return or file one.
When mishaps occur and business do not file tax returns, it adds to the state’s tax gap — the amount of unpaid taxes. As anyone could see, it benefits the state to seek out the unpaid taxes. However, not everyone intentionally avoids paying state income taxes. Taxes are complicated, and it is not always clear who is required to file. If you find yourself on a list of businesses that have been noncompliant, it may be helpful to work with an attorney who can explain the process and ensure that you don’t incur any penalties.
Source: Daily News, “California contacting businesses to file tax returns,” July 25, 2013