Over the past week, my work within the finance department at Indium Corporation has spanned a variety of tasks necessary to our organization. One of the most interesting and unique discussions was about our tax payment structure and what we do to tackle the complex legality of this important obligation.
Taxes are a crucial element to every business’s financial position, and having trained staff that are experienced in the upkeep of a company’s tax statements is crucial. Like a majority of other businesses, Indium Corporation establishes a continuous auditing system to ensure the constant improvement of their internal departments. However, because such audits require a large task force, they become the primary concentration of the finance department at the same time as taxes are due. Instead of calculating the exact amount of taxes to be paid to the IRS, Indium Corporation pays a tax estimate, and files a 6-month extension on the determination of their actual tax owed.
Six-month extensions are allowed for a majority of businesses, and it is preferable for them to pay more in their estimate than what they expect to owe. If the company pays less in its estimate than it actually owes, the IRS will charge the repayment of that money along with a percentage of interest. Normally, it is an interest rate that most people would consider reasonable. In these cases, a business that produces a substantial profit pays a substantial amount of tax in which even a small interest rate can become a severe cost.
Only hands-on experience has taught me these valuable concepts. As beneficial as it is to gain knowledge through research and academic development, continuing to learn and grow in a real-world setting assists myself and others in truly grasping the importance of corporate finance.
