Starting a small business is not only an incredible accomplishment, but also the start of a journey with great responsibility. As most successful entrepreneurs know, running a successful business requires help from a number of people, whether it’s your family, employees, partners or a combination of them all.
But what happens if you don’t know you need help in the beginning?
One of the greatest, most common problems we see with new small business owners is their understanding (or lack thereof) of all their tax and compliance responsibilities. It’s so easy to miss seemingly minor details because so much is on your plate. You’re working so hard to get your company off the ground that you may not even think about your tax responsibilities.
The problem, as the small business owners we’re about to discuss experienced firsthand, is that failure to address your requirements can result in serious consequences.
Forgetting The First Step Of Taxes
Many small business owners struggle to save for their taxes, but 10 months into opening their small business, two owners (who we’ll name Jack and Jill) had failed to file their required monthly sales tax returns and quarterly payroll tax returns. Though Jack and Jill were making payroll tax payments, they had not paid any of their sales taxes.
Jack and Jill quickly knew they had issues. The state of Illinois contacted them about their unfiled sales tax returns. Unsure what to do, the owners quickly reached out to a local professional with vast tax and small business experience.
Upon her initial discussions with Jack and Jill and a review of their IRS notices, their new partner immediately prepared and filed the missing returns.
The State Took Action Against Their Business
Though Jack and Jill’s tax advisor filed their returns as quickly as possible, the state had contacted the business’s bank and put a freeze on their accounts for the amount they owed in sales taxes – a power that the state of Illinois has under these circumstances.
Jack and Jill’s ability to withdraw funds to run their business was limited.
Because the amount of sales tax due was considerable, the state scheduled an administrative hearing for Jack and Jill. Unless they paid the sales taxes they had withheld, the state threatened to pull their business license and shut down their company.
Needing to pay 10 months’ worth of sales taxes before their looming administrative hearing, Jack and Jill worked with their advisor to develop a plan to pay these taxes.
Finding Help To Pay Their Tax Dues
In need of money they didn’t readily have available, Jack and Jill needed a loan. Their tax professional put the owners in contact with a loan officer she knew, and they were able to borrow the funds necessary to pay their unpaid sales taxes.
With the consistent support of their advisor, Jack and Jill now report their sales tax on a monthly basis, and are even able to take a small discount each month for paying as quickly as possible.
Take it from Jack and Jill: Know everything that’s required of you to comply with the IRS and state, from taxes to accounting and beyond. With all of the hard work involved in starting a new business, you don’t want to jeopardize your success.