It may seem like tax time is a long way off, but if you put off tax preparation until April 1, you may not have time to save yourself from a messy financial situation.
Tough numbers
Having little mistakes here and there may not seem like a big deal, but a financial calculator can prove these don't just add up at the bottom of the page, they can hit a business hard in the event of an audit.
In Canada, when sales tax amounts rolled over from 5 to 13 percent, IT managers at one Ontario firm didn't catch the change soon enough to update internal processing, resulting in a shortage of tax payment for that period, according to the Financial Post. Underpaying this to the government could wind up costing companies dearly in penalty and interest, meaning the uncollected tax has to come out of the company's business banking rather than being paid where it was due.
Another instance put Curt Schilling's 38 Studios out of business at least temporarily. Improper accounting resulted in late payment on a state-backed loan, and under threat of being forcibly closed, Schilling chose to liquidate company accounts and pay back the $1.1 million owed. Without any money left over for payroll, though, everyone was sent home indefinitely while Schilling privately pursues additional funding and money he says Rhode Island still owes the company.
Check the figures
It's not impossible that the tax department might be wrong too, which means you shouldn't cut costs by hiring a cheap accountant.
Singer Dionne Warwick recently fought back against a levy presented against her by the Internal Revenue Service claiming she owed $2.2 million in back taxes. It turned out that the IRS had an accounting mistake of its own, meaning the amount owed was actually just over $1 million, but the lien was subsequently removed, according to Forbes.
Fix it now
Other companies have caught their own mistakes and notified authorities on their own behalf to avoid extra fines.
Natural gas provider Williams Companies reported to the Securities and Exchange Commission (SEC) that its most recent internal audit found accounting errors resulting in a 28 percent loss in value for shareholders. The SEC has taken no action while Williams works to resolve its own accounting issues, but had the Commission caught the error itself, the business could have been in serious trouble.