Dealing with Under-Reported Income? Here is How to Fix It (Without the Panic)
Discovering that your business has under-reported its income can send a wave of panic through any business owner. Whether it was an oversight, a misunderstanding, or a byproduct of a stressful financial period, the weight of unresolved tax issues is a heavy burden to carry.
But here is the good news: mistakes happen, and there is a clear path forward.
At MyTaxCA, we recently helped a local business navigate this exact situation, saving them thousands of dollars and restoring their peace of mind. Here is their story, along with the steps you can take if you find yourself in the same boat.
Case Study: From Cash Flow Crunch to Clean Slate
We were approached by an import business based in Onehunga with a team of five staff. Due to an intense cash flow crunch during a period of rapid growth, one of the business partners had under-reported the company’s income for two consecutive years.
It wasn’t intentional. It was simply the result of a tough period where managing daily cash flow took precedence over perfect bookkeeping. However, they were now looking to bring a new partner into the business, and they knew their accounts needed to be completely accurate before that could happen.
The Outcome
We stepped in to work closely with the client and Inland Revenue (IRD). By taking a proactive approach, we successfully saved the business $5,000 in interest and penalties. More importantly, the accounts were corrected, the new partner was able to join with total confidence, and the business owners could finally breathe a sigh of relief.
3 Steps to Take If You’ve Made a Tax Mistake
If you think your business has under-reported income or made a mistake on past tax returns, don’t wait for the IRD to find it. Take control of the situation with these three steps:
1. File a Voluntary Disclosure with IRD
The absolute best thing you can do is come forward voluntarily. IRD is far more accommodating when you approach them to fix a mistake than when they uncover it during an audit. Filing a voluntary disclosure can significantly reduce—or completely eliminate—shortfall penalties.
2. Talk to Your Accountant Immediately
You don’t have to navigate the IRD alone. Your accountant is there to support you, look at the big picture, and format the disclosure properly to ensure you get the best possible outcome.
3. Put Better Systems in Place
Once the mistake is corrected, look at why it happened. Implementing robust accounting software, setting up automated cash flow tracking, or outsourcing your regular bookkeeping will ensure you never face the same issue again.
Need to fix a tax slip-up? > Don’t let tax stress hold your business back or get in the way of growth. Get in touch with the team at MyTaxCA Chartered Accountants & Business Advisors today, and let’s get your books sorted out together.
