I have a problem I am hoping someone can help me with.  I received a phone call from the State of Arkansas telling me that I should be charging sales tax on my services. I told him I was not aware of this. He said that there are quite a few cleaning companies in the phone book that was not aware.  I didn't think services charged sales tax in my state. Beauty shops perform a service to everyone and don't charge sales tax.  He will be auditing me on June 17th.  He said that he would go back 3 years. Oh boy! This doesn't look good! Has this happened to anyone here? If so, what did you do? Please help.

Start saving, sorry to hear that 

what ever you grossed in the last 3 years on your

business and filed, what ever your sales tax %  that is the amount you will owe.

example: if you made 50k each of the 3 years, then the total is 150k

if your sales taxe is 5% then you will owe $7,500.00 plus the fines.

start charging your customers the sales tax also.

Will they give me the amount and expect me to pay it immediately? What are my options as far as paying the bill? Is a business owner able to get a loan to pay for this if it is due immediately? Sorry for all the questions. I am very worried about this. I did call my attorney to research this hoping he might be able to help me. Do they always charge a penalty or can you get that waived?

 I am quite sure that the majority (if any) of house cleaning services are not paying sales tax in my area.

 Will they give me the amount and expect me to pay it immediately?

Yes they'll give you the total. you can make payments, but they'll charge you interest.

 Is a business owner able to get a loan to pay for this if it is due immediately?

you can try, but like above they'll let you make payments 90% of the time.

I did call my attorney

forget the Attorney, there an attorney, not an accountant. you need to call an accountant who is a CPA. who ever was your accountant now, fire them they should of knew you needed to pay sales tax's and should have told you. so you might want to start calling some CPA's in your area.

Do they always charge a penalty or can you get that waived?

you can ask to have it waived, if the find it was an honest mistake SOMETIMES, but rarely, they will waive it. 

I am quite sure that the majority (if any) of house cleaning services are not paying sales tax in my area.

Doesn't matter, I can imagine a lot of them are not even claiming the money they made, BUT The IRS and State only care about the ones they catch. Best thing is to be as nice and as cooperative with the auditors as possible. if you point fingers at others, and start arguing and making excuses with them, they'll have no mercy.

The Best advice I can give is CALL a Good CPA, make sure they have a office, employees, secretary and been around for a long time, don't hire someone who is doing it in there spare time from home.

Wish you the best of Luck.

 RJ gave you excellent advice.  I concur with everything he has said.

Good luck with it and let us know how it is going. 

My former accountant didn't tell me I had to pay sales tax, either. In fact, I brought it up and she said flat out that I didn't have to pay sales tax. Well, obviously she was wrong which is why she's "former". Stupid...I automatically charge my clients the 6.5%. Nobody balked at it.

Well I visited with the auditor the other day.  He wouldn't give me the numbers until he went through the last 3 years tax return.  He did say that he wouldn't charge me a penalty. He did say that he has to charge me interest of 10% per year.  I have figured it up to be in the range of $30,000.00!  He said the DFA would let me make payments but didn't like to go past 6 months financing. That would be 5,000.00 per month! Does anyone know if they will go over the 6 months?  He told me that I have to put in writing a payment plan and submit it to them.  There is no way I can pay 5,000.00 per month! I did talk to my attorney and he really didn;t know what I could do, so I contacted another and he hasn't called me back.  What can I do? I am desperate for help.

Get a good tax attorney. You'll have to pay her a retainer and whatever her hourly rate is for whatever negotiations she provides on your behalf with the state department of revenue, but a good tax attorney will know exactly what to do and how to advise you. The state could put a lien on your personal or business property and other assets... meaning, when they are eventually sold or probated, the revenue from the sales will go toward your tax debt. Your best bet is to hire a tax attorney and turn everything over to her.

As an alternative, you could try to get a low interest loan and use the money from the loan to pay back the debt. This would allow you to pay it off within the required 6 months timeline; and if you could beat the 10% interest then you would definitely be better off than letting that interest and additional penalties accrue over x number of months or years.

I think you'll feel alot better after you talk with a tax attorney who specializes in dealing with the department of revenue in your state. Don't randomly call attorneys in the phonebook. Ask other biz owners in your area for a referral. Ask several until one name keeps popping up over and over again. That will be the person to call. Just ask around. You'll likely be surprised at how many other biz owners have found themselves in the same situation.

I believe your attorney can negotiate a partial repayment based on your current income... in other words, settle your account in full for pennies on the dollar based on your income and ability to pay. Of course, it will cost you a small fortune to get something like this done but certainly less than the $30,000.00 you owe in back taxes. I feel for ya. Sorry this has happened to you. Let us know how it goes. Good luck.

 I used to work for a tax attorney.  Hazel is correct...hire a tax attorney and they can negotiate for you to your benefit.  You'd be suprised what they can do.  ;)

How did you make out with this.  Could you please update.

I received a bill from the DFA for $ 31,000.00. I have hired a tax attorney. He said they would alleviate the interest and I would owe 28,000.00 and they would finance for 5 years (600.00 per month), or we could do a "offer & compromise" where we send them all of my bank statements, etc. and write the amount we want to pay and they either accept it or not. I decided to go with the "offer & compromise" and hope they will accept a much, much less amount. Has anyone done this?

nope never done it before, if you really don't have that kind of money.

Just take your bank statements to your tax attorney and he should be able

to tell if you have a chance.  

Custom Maids:

I received a bill from the DFA for $ 31,000.00. I have hired a tax attorney. He said they would alleviate the interest and I would owe 28,000.00

That is a Hell of a bill, what is the tax rate in your state? You had to of made hell of money for the tax alone to equate to $28,000!!  Does that amount include penalities? 

her bill was $28k then 3k in penalty's, they went back 3 years on her. so its $9333 in sales tax per year.

so you figure if the sales tax is 6% then her business was grossing around  $150,000.00..

www.rjcleaning.com

With all that is going on here in my life, I didn't pay my last quarterly taxes yet.  I have the money...I simply forgot.  I quickly found out that in our state, they will send someone to your DOOR to collect.  The tax lady made her appearance this week to my house!  I was astounded.  I could be wrong on her reason for appearing (DH was home and I wasn't so he got her card) so I may be in for a surprise if I am wrong.  LOL  I can't think of any reason other than being late on my last quarter due in April. She is now onvacation so I left her a message.  I will find out next week what the problem may be.

Considering how many people there are on Craig's List in my area, she'd be better off sending me a quick note to remind me to file and start knocking on *other* doors to start collecting.  Grrrrrr.... Here I am just a little late and there are those who simply refuse to do things by the book. 

Now, if I were given bad advice three years into this and had grossed those kinds of sales, I would have a coronary.  At least I can write a quick check and get it behind me, but gosh...that much at once?  No way, no how.

That's why I highly recommend a tax attorney.  They can get that amount lowered significantly, regardless of which portion is penalties.  ;)