![]() And if you doubt you’ll be caught, just ask recent tax evaders, Wyly and Zukerman, about it. By avoiding sales taxes, you are not only putting yourself and your business at risk, but you are also negatively affecting your community. States depend on sales tax revenue to provide a wide array of civil projects, including infrastructure, crime prevention, public programs, and education. If the sales tax fraud is found to be deliberate, violators can even face jail time. No matter the dollar amount of unreported income, business owners should expect large fines (from 25% to 75% in civil penalties). This may not necessarily be the fault of a business, but the state and IRS are not known for their compassion toward filing mistakes. These tax preparers usually promise big tax returns and accomplish this by underreporting income. Tax preparers with a number of large returns.This is done as a way of discouraging sales tax avoidance and detecting fraudsters who may have gone unnoticed. Businesses or entrepreneurs operating in industries with a large number of cash transactions may be audited-whether or not there are issues with their tax filings. This means that each time you request cash for a “no-tax” price, you run the risk of being reported. Each state has a toll-free number that customers and employees can call to report sales tax evasion. That means looking at your business and personal accounting records, including spending, to see if everything adds up correctly. ![]() If the IRS or the state notices discrepancies in your filed tax return, they will usually begin investigating. See some of the top ways businesses are caught avoiding sales taxes. Second, states depend on sales taxes to fund a myriad of programs, meaning they particularly monitor cash-prone businesses (like grocery stores and restaurants) closely. First, the state monitors your income-and yes, that includes monitoring for sales tax evasion. While many businesses believe that sales tax fraud can easily go undetected (usually by collecting cash payments or not issuing receipts), this is not exactly the case. Basically, this type of criminal offense occurs when either a business fails to collect sales taxes from customers, willfully or negligently doesn’t forward sales taxes to the state, or reports inaccurate sales tax figures. Understanding sales tax fraud is pretty simple. But what exactly is sales tax fraud and what penalties might a guilty verdict mean for Hankerson? Sales Tax Fraud: Explained This high-profile case should serve as a cautionary tale to small businesses everywhere: The risk of not complying with sales tax just isn’t worth it. Shanga Hankerson, Knight’s son, was accused of stealing roughly $650,000 by withholding sales taxes owed to the state. Recently CNN reported on a raid of Gladys Knight’s Signature Chicken & Waffles restaurant by Georgia’s Department of Revenue.
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