What do you mean by VDA?
By filing VDA companies can pay those income tax and sales tax that they have not paid before the state government knows the tax owed to the businesses. With the help of which companies can avoid paying the huge penalty imposed on the businesses by the government and save their money.
This is a very good way for companies to avoid penalties as the state government is continuously searching for tax debtors and is charging more money from them in the form of penalties, which causes huge losses for companies. Hence it is important for every company to file VDA to avoid such a situation.
Pros:
By filing VDA companies don’t need to pay a huge penalty.
Often companies that do not pay their tax on time usually need to pay heavy penalty and interest along with the outstanding tax because of which the companies have to face huge losses, as companies often have to pay 25% or more penalties. The only way to avoid this loss is to file VDA on time, companies can avoid paying more penalties by filing VDAs on time. After filing the VDA, the states may either reduce the interest on your tax or may waive the interest, penalty this will give a lot of relief to the businesses.
Businesses required to pay only a few years’ taxes.
Many businesses do not file their tax, and income tax returns for years, such companies required to spend a huge amount of tax later but if the businesses register for VDA before the state government audit. They will need to pay off only the last 3 to 4 years of tax because the state may waive the sales tax and income tax for the rest of the years so that the businesses will have to bear less loss.
Be anonymous during the whole procedure.
By filing VDA several states gives the opportunity to businesses to keep their name hidden for some time. By this, the businesses can describe the situation as to why they were not able to pay the taxes on time and wait till the state will approve their request before disclosing their name. However, few other states still wanted to know the name of the business which hasn’t paid their taxes yet but still, there are many states where there is a facility to give them some time to reveal their identity. Therefore, the companies can complete the whole process regarding the tax submission anonymously by filing VDA.
Fewer documents are required for audit.
If a business does not file a VDA before the state’s audit, then the state demands more documents while auditing the company, which is not easy for every company to collect but if a company files the VDA on time they are not required to submit more documents, even if fewer documents are given, the tax of that company can be reduced or waived.
Cons:
VDA has no value without explaining the company’s situation.
Describe the entire situation of your company to the state government so that they can understand the reason why you’ve not paid your taxes on time. However, if you’ve failed to describe the reason then your VDA will be considered illegal.
Explain everything in detail to your representative.
Explain the details regarding tax and your company, don’t hide anything from your representative because he will represent on the behalf of your company to the state government and if any detail of your company is wrong then it will increase the risk of disclosing the identity of your company in front of the state government.
Give complete detail.
Don’t provide incomplete information during the process of filing VDA. Research well and provide detailed and relevant information while filing the VDA, because if a company provides incomplete information during the process of filing VDA then the VDA application might get rejected.
Conclusion:
Either a company is small or big both should file VDA on time if they had not paid their taxes for years because it helps them to avoid spending large sums of money on the penalty.
