Seriously… Tax Returns Have to be Filed and Recorded

Tax time is looming. As a business owner, it is important to actually FILE your tax returns. This might sound strange to you and it is… we actually have clients that have provided us with three years of tax returns as part of the due diligence process. As the deal progressed and the buyer’s bank was verifying financial information, they discovered that the tax returns were never filed. The IRS had no record of the tax returns.

The motivation behind this could be a couple of things. It is a way to delay paying taxes. If the business was showing a loss, they might have assumed they didn’t have to file a return. In either case, by not filing, there are going to be penalties and interest that will cause a lot more expense in the long run. This can also seriously delay the actual sale of the business and can put the deal at risk because the potential buyer could and should start asking serious questions about the business and other information that was supplied. The bank funding the deal will raise a series of red flags as well… the beginning of an uphill battle.

The fact that you did not file your taxes will be discovered at some point in the process of selling your business. This issue, as well as many others, comes up often. We can help you prepare for the sale of your business and you need to start now… it may take years of appropriate practices to make sure your business is as attractive and valuable as you think it is. Call us for a free consultation.