What Happens if You Fail to Pay Corporate Taxes
As a responsible corporate citizen, it is essential to pay your corporate taxes on time. However, sometimes companies fail to pay their taxes due to various reasons such as financial difficulties or ignorance of tax laws. Nevertheless, it is important to understand the consequences of failing to pay corporate taxes.
Legal Actions
When a corporation fails to pay taxes, legal actions can be taken against it. The government can issue a tax lien on the company's assets or a levy on its bank accounts. A tax lien is a legal claim against the company's property, while a levy allows the government to seize money directly from the company's bank accounts. These actions can severely impact the company's financial stability and credibility.
Penalties and Interest
Corporate taxes that are not paid on time will incur penalties and interest charges. The penalties and interest impose a financial burden on the corporation. The company will have to pay an additional amount in addition to the original tax amount. The longer the tax remains unpaid, the higher will be the penalty and interest charges.
IRS Audits
Failing to pay corporate taxes can lead to IRS audits. The IRS can initiate an audit on a corporation if there are any suspicions of tax fraud or negligence. The audit process can be expensive and time-consuming for the corporation, and it can also affect the company's reputation. The IRS can also investigate the corporation's tax records, which can further damage the company's image.
Criminal Charges
When a corporation deliberately evades taxes, it can lead to criminal charges. Tax evasion is a serious offense and can result in imprisonment or fines. The Internal Revenue Service investigates corporate tax fraud and takes legal action against companies that evade taxes intentionally. Therefore, it is essential for corporations to pay their taxes on time to avoid criminal charges.
Damaged Business Reputation
Corporate tax delinquency can damage the company's reputation. A company with a reputation for tax delinquency will face difficulty in obtaining loans and attracting investors. Companies that have outstanding tax liabilities have a negative image in the market. Corporate taxes are essential for the smooth functioning of an economy, and corporations that don't pay taxes are seen as not contributing to the society.
The Bottom Line
Paying corporate taxes is the responsibility of every corporation. Evading taxes can lead to serious legal actions, penalties, auditing, and damage to the company's image. Therefore, corporations must calculate the taxes payable on time to avoid any future financial and legal troubles.