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Beware of inconclusive bookkeeping

Here we are at a time when we are approaching the closing of the accounts for 2023 and the filing of personal and corporate income tax returns.

In this context, we have been approached by the managing director of a private limited company that he needs to “straighten out” the 2023 accounts and file his tax return.

Unfortunately, he does not have a complete set of supporting documents for 2023 and he has not filed a tax return for 2022. The accounts are inconclusive and there are unpaired payments in the bank account turnovers.

It is not in the power of magicians, let alone accountants, economists or tax advisors to prepare proper statements and file returns if all the supporting documents are not available.

Our company offered the potential client a complete reconstruction of the accounts for both years. Unfortunately, this is of course time consuming and costly, but it is the only possible solution if the accounts and taxes are to be in order. The unrecorded expenditure movements will unfortunately be tax deductible.

Failure to correct and file returns exposes every business to penalties and fines from the tax authorities.

The tax authority will firstly send a notice to correct the deficiencies and file a tax return. At this point, you must already pay the penalty for late filing of the return. If you do not respond, the penalty for not filing the return will come and you are also committing an administrative offence. If you continue to fail to respond, the tax authority may assess the tax by means of evidence or, as a last resort, by using aids.

Failure to comply with tax obligations and respond to the tax authority’s requests can result in your company being labelled as an unreliable taxpayer. (A company that does not have its tax documents in order and is assessed at least CZK 500,000 by the tax authority, and a company suspected of being involved in fraud, are considered unreliable. A company that repeatedly fails to meet mandatory filing deadlines can also be classified as an unreliable taxpayer! Both natural persons and legal entities can become unreliable persons on the basis of a decision of the tax authority).

Therefore, do not leave the checking of the accounting to the last minute and keep an overview of its status and the state of the company’s management.

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