Economic growth in any state is only possible if its citizens are compliant with tax filing. However, tax filing requires a lot of hours and document processing. As such, most people find it a stressful affair. However, the implication of tax evasion can be detrimental, especially if you have a business. As a business person, you need to understand different taxes and know the filing procedure. Most small businesses tend to concentrate on other aspects, including revenues, inventories, sales, and marketing. However, tax compliance is one of the things they tend to overlook. Tax evasion can take a major toll on one's business. Below are some of the consequences your business may accrue due to tax evasion.
1. Loss of Business Assets
You may have been getting away with tax evasion for years. However, you may be compelled to pay the cumulative taxes when the state discovers. When the state notices that you have failed to comply with the summons, they may come for you. However, your failure to comply with tax filing may result from insufficient funds to meet the required payment. You must always ask yourself how much is the penalty for not paying estimated taxes in your state before evading taxes. When the state notices that your business does not pay the taxes, your business assets get seized. It becomes such a shame that after working hard to get your business up and running, asset control is taken over by your state due to your oversight of tax compliance.
2. Business Incurs Loss
It is already established that ignoring taxes may point the state on your radar. As such, the state may take legal actions against you to recover the tax you have failed to pay over time. As a result, you may need to hire a top-notch attorney for your representation. Such unnecessary services may hurt the business revenue. Also, since most of your attention will be directed to the tax-related lawsuits, your business operations may suffer.
3. Affect Your Business Point of Sale
You may have been avoiding taxes since your company operations are exclusively online. However, you may have exposed your business and its audit proved that you are not compliant with your tax filing. When your goal is to sell your business, your returns may suffer during the point of sale.
4. Negative Publicity
Once your business has been identified as evading taxes, your credibility is shuttered. As such, no one may want to associate with such a business. The negative attention drawn to your business during this time may lead to the loss of clients and investors. You may be feeling that you have found a way to reduce your tax burden. However, it is not worth it when you will end up losing potential clients and sales in the long run. It is never easy to regain people's trust once you have been connected with something negative, especially in the business world.
5. Inability to Franchise
If you have a small business, you may consider franchising with already established companies to gain awareness. Large distributions already have loyal consumers, and getting a reach to a larger audience may be possible if you incorporate their distribution channels. However, most well-established companies never want to identify with businesses that have tax-related issues.
6. Payment of Interest Fee
When your business is in contempt of tax filing, you will not only be forced to pay the cumulative tax owed to the state. You will also be forced to pay the tax with interest. Tax interest starts being calculated the moment the tax is due. Interest penalties for businesses with late remission are always high. You, therefore, find that eventually, that penalty may be too much for you to pay, leading to loss of your business assets or being forced to pay out of pocket.
Despite the challenges of filing taxes, you need to ensure that you are tax compliant. As such, you get to protect your business image and its financial structure.