There are a wide variety of reasons why VDAs are used. To discover a few, that may convince you to go ahead and to use a VDA to your advantage simply continue reading. Especially if you’re not sure how VDAs work. Especially if you’re becoming increasingly concerned that your business’ outstanding taxes could hurt your business’ image, legitimacy or financial viability in the future. Especially in the event that your business is selected to undergo a random audit by an independent third party, that may find issues with your financial documents.
Common reasons why VDAs are used:
To avoid incurring financial penalties:
While if you are the owner of a large, multinational business your business may have the available funds to pay any fines that may come up as a result of failing to pay your taxes on time, such as your sales taxes in states where your business is deemed a tax nexus, if your business is smaller you may find it difficult to pay any financial penalties which you are handled. Especially if your business is relatively new and you haven’t had time to build a nest egg for a rainy day.
Your first step in negotiating a VDA:
If you want to pay outstanding taxes from the last few financial years, your first step should be to decide whether you’d prefer to file your VDA yourself in order to save money or whether you’d like to use a third-party agency to help you. If you’ve never filed a VDA before, it may be in your best interests to use a third-party agency to help you. Especially if you’d prefer to keep your identity and that of your business on the down-low. As a third-party agency can help negotiate an anonymous VDA for your business. In this instance, an appointed auditor would take a look at your business and the taxes that you owe and would allow you to pay these taxes, without the state knowing your name or the name of your business. Or further looking into the accounts of your business.
In order to prove a business’ legitimacy:
Another reason why a business may choose to use a VDA is to prove that their business is a law-abiding and transparent business that is not trying to manipulate their accounts or the law for their own benefit. So if you want to prove that your business is legitimate and are not trying to hide any dubious facts, you may want to negotiate a VDA for the first time.
To pay less interest on your outstanding tax:
The sooner that your business comes clean about owed tax, the less interest that you’ll have to pay on the tax that you’re yet to pay. So pay your outstanding tax now, not in two years time.
In conclusion, if you’re convinced of all of the reasons why a business should want to negotiate a VDA agreement at the earliest time possible, it’s definitely well worth talking to an agency that can handle your VDA process for you.