Happy New Year!!-Preparing for 2010

2009 has been a real roller coaster for state governments.  As the year started, they knew it would be bad. As the year progressed, it began looking worse than expected in terms of total state revenue.  As it concludes, the landscape of state revenue is pretty bleak. In the 2nd quarter of 2009, total state revenue was down by over 16% and that trend will probably continue for the 3rd and 4th quarters of 2009.  Income tax receipts are down the most but sales tax is off by at least 10%.  

Why should you be concerned?  Let me outline the reasons.

1. increased enforcement (more audits) on registered and unregistered businesses. 

2. more challenges by auditors to issues that are vague or questionnable

3. more legislation to increase rates or to eliminate exemptions

4. expansion of tax base to impose tax on untaxed services and other nontaxable transactions

5. more pressure on corporate officer liability for unpaid tax.

What can you do now to prepare for 2010?  Plenty.

1. Look at what changed in your business during 2009.  Did you expand your sales footprint, change systems, change customers, change products or services.  All of these things can impact your 2010 sales tax liability.

2. Review any completed sales tax audits for 2009.  Have you made the required changes?  Are these same issues going to re-occur during 2010? 

3. Begin a periodic review of exemption certificates.  Missing or incomplete certificates is one of the most common audit issues companies see.

4. Complete a quick assessment to see if you are filing in the correct jurisdictions.

5. Perform a reconciliation of your tax liability accounts.  Have you paid all that is due?  Have you paid more that what is due?

6. Look ahead to 2010.  Are there unusual events (expansions and contractions) that are scheduled to take place.  Evaluate the tax impact of these and begin to put processes in place to deal with these changes.

Conclusion

The best defense is a good offense.  Be proactive in analyzing where your issues are and start to take responsibility for correcting these mistakes.  It will far more costly in the future to pay the tax, interest, and penalty than to deal with them now when they are small.