Filing taxes is difficult to understand, with more than four hundred various tax forms to report pertinent financial information. Failure to report information, file returns correctly, and submitting them on time may all result in hefty penalties levied by the Internal Revenue Service. Knowing current and past years’ tax filing information is equally important in many situations.
Tax form 4506-T allows businesses to gain access to tax forms filed in previous years. It may seem like previous years’ tax forms are not important; however, obtaining official copies of these returns is absolutely necessary in several situations.
When corporations go to court, disputes usually consider past levels of income in determining reasonableness, materiality, and dollar amount of potential damages. Filing a 4506-T is the official method of getting past years’ tax returns for use in legal situations. Demonstrating that taxes were paid in full usually hinges on income earned and taxes paid in prior years.
Proving income to creditors and lenders
Securing financing for any purpose requires businesses to demonstrate to lenders that assertions about expected income are true. For large-scale corporate lending, official proof from the Internal Revenue Service is often necessary as part of supporting documents for securing loans. Obtaining tax returns from prior years using a form 4506-T is also valuable in refinancing outstanding balances and lowering current interest rates.
Better record keeping
Whenever a corporation’s employees are uncertain about prior years’ reported income, corporations can file a 4506-T to assure their accounting functions of various information reported. If estimates are changed or new records are realized, amendments to prior years’ tax returns are usually necessary.
Reduce likelihood of estimated tax penalties
Corporations are required to file taxes for times a year. These taxes are estimated, which means they are based on prior years’ incomes. Understanding exactly how much a corporation earned in prior years is necessary for estimated tax payments.