When a sales tax audit is complete, you could be facing a huge bill for penalties, interest costs, and fees. Even though you were careful with the collection and payments of sales tax, there are times when mistakes are made with the documentation. These seemingly small issues can add up over time, resulting in serious financial costs for your company. Don’t assume that you need to pay the amount in full, because there might be an opportunity to consider an Offer in Compromise.
What is an Offer in Compromise?
An Offer in Compromise, commonly known as OIC, is an agreement that is formed between the Department of Revenue and the taxpayer. If your business owes a lot in taxes, then it is possible that these tax liabilities can be settled for an amount less than the full amount that is due.
An OIC might be available if there is a doubt about the liability or collectability. If the Department of Revenue is unsure about the ability of a business to pay the costs, then they might consider an offer in an attempt to collect whatever is available.
Do You Qualify for an OIC?
In most cases, business owners won’t qualify for an OIC if they are able to pay the liabilities in full through an installment agreement. So, usually, an installment option is the first thing to consider if the payments can’t be met.
The qualification details vary depending on the type of taxes that need to be paid and the amount that is owed. In most situations, it is necessary for the taxpayer to have filed all tax returns and met other requirements before this option is considered.
OIC After an Audit
One instance when an Offer in Compromise might be available is when a business has a large sum to pay after an audit. If the auditor uncovered errors or mistakes in the sales tax calculations, then back pay, penalties, and interest costs will form the total amount due. For a large company, this amount can be staggering. For example, there are situations when a business is facing six figures in taxes and penalties that are due.
If cash flow is tight and you can’t pay the balance in full, then you need to discuss your options for an installment plan or an Offer in Compromise. But, keep in mind that you should never start this conversation without the assistance of a professional representative. You need an industry expert who can negotiate on your behalf to minimize the risk and burden that is left on your business after everything is complete.
The audit has the best interests of the Department of Revenue in mind, which is why you need to hire someone who will watch out for your interests. If you need assistance, then you can contact our team at Biz Tax Pros. We offer a variety of sales tax related services, including auditing defense. Call today to learn more about the options that are available for your needs.
Legal Disclaimer: This article is for educational purposes only, it is not meant to give legal advice. All business situations are different, which is why it is best to consult with a professional team for personal recommendations. Please call us or schedule an appointment if you need assistance to with your sales tax questions or concerns.