Why It's Crucial to Stay on Top of Tax Notices
Every business receives tax notices, and they can mount up quickly if left alone. It's all too easy to let one or two slip through the cracks—to potentially dire consequences. Responding by the notice's timeline is vital, or you may incur fines and other penalties.
That means it's very easy for the tax notice situation to become overwhelming, especially for smaller companies who may not have the resources to deal with them.
Understanding Tax Notices for Business
The IRS sends out tax notices for various reasons. Some of these tax notices provide you with information, such as letting you know you are getting a larger or smaller refund than expected or reminding you of a filing deadline.
Others require a specific response, like if you have a balance due that you need to pay. States also send out notices. Businesses might also receive notices related to grants, franchise taxes, unfiled returns, or payroll. As the tax code becomes more complicated, the number of notices you receive will increase. Also, the IRS is catching up on a lot of business put on hold during the pandemic, and there are notices related to pandemic-era credits and rebates.
Anything you receive from a taxing authority, whether it's the Federal government, your state, or local jurisdiction, is a tax notice.
Risks of Letting Notices Pile Up
It's very easy to let these notices pile up in an inbox until you have a stack of them. The fact that not every notice actually requires action can make it even more challenging to keep up with those that do because they can get buried in the pile.
Staying organized helps keep you informed and ready to remedy any possible issues. Here are some of the risks:
- Disorganization. As notices pile up, the risk of missing something important grows. They can also become overwhelming, and the person responsible starts to put them off further. If you need to reconcile something, you may not be able to find the notice. Did you just get overpaid taxes refunded? You need to be able to match that to the notice.
- Receiving even more notices. Some jurisdictions deem that if you don't respond to a notice, you likely did not receive it. In response, they will keep sending out duplicates until you respond.
- Being charged fees. Some agencies will also charge you a fee or fine if you don't respond within a given timeline. These fees can increase the longer you put things off, and while they tend to be minor, they can quickly mount up over time, especially if you miss multiple notices.
- Paying incorrect amounts. Let's say that you have been overpaying your taxes, and they credit your business. If you don't notice, you will keep overpaying, giving the government an interest-free loan. Or if you have underpaid and don't notice, you may continue to underpay.
- Penalties for missing payments. You may completely miss that you owe money and must pay late fees. These can be low, at the amount the IRS or your state charges interest, but can be higher.
Keep Organized With Tax Automation Software
So, how do you keep all of those pesky notices under control? Manually tracking notices makes it difficult. They can be lost, filed in the wrong place, or sent to the wrong person. Or they may be filed by somebody who thinks the action occurred when it hadn't.
The answer is tax automation services. It stores your notices in one place and automatically sends them to the right person. Once you set up your automation software, you simply scan the notices, and they will be dealt with appropriately. You will always be able to find them when you need them. The software can also help you optimize your tax credits and avoid overpayments that take money out of your business.
That's where NoticeNinja comes in. Our tax software eliminates manual data entry and notice routing streamlines your workflow, and helps you track your documents. It keeps you organized, saving you money and employee time, and reduces the risk of significant tax compliance issues.