TAX GUARD INTRODUCES THE LIABILITY INDEX© FOR ASSET-BASED LENDERS
More than two-thirds of companies considered for funding have hidden tax liabilities or are missing tax returns.
Tax Guard, Inc., a tax compliance monitoring service based in Denver, released today its inaugural Tax Guard Liability Index©, a monthly indicator of tax risk for asset-based lenders in the United States. Tax liabilities and missing tax returns are some of the most serious indicators of a borrower’s risk of defaulting on a loan payment.
The Tax Guard Liability Index is created from a monthly analysis of over 5,000 companies Tax Guard monitors for tax compliance. Through its patent-pending process, Tax Guard identifies all companies that have federal tax liabilities and the total amount of each. Tax Guard also identifies whether or not the IRS has issued a tax lien against each liability. The aggregate data is compiled to show how much total tax risk exists for lenders.
The results for September show that among a nationwide sampling of 5,408 businesses considered for, or receiving, asset-based loans, 73 percent have tax liabilities or missing tax returns. Of those businesses, 92 percent had liabilities and/or missing returns with no liens filed, making them undetectable by UCC searches. Using its patent-pending monitoring process, Tax Guard uncovered nearly $47 million worth of non-liened tax liabilities for an average liability of $41,287. This indicates the risk to asset-based lenders remains very high in the U.S. and points to one reason why businesses continue to have difficulty getting funded despite available cash among asset-based lenders.
Since January 2011 when Tax Guard began collecting monthly data of companies it monitors, the percentage of businesses with hidden tax liabilities has ranged between 29 and 31 percent. Total liability amounts have risen from $36 million in January to $47 million in September, which Tax Guard President Hansen Rada attributes in large part to the added penalties and interest that accrue from month to month.
“What the Tax Guard Liability Index finds is that the rate of risk to asset-based lenders is increasing as companies continue to struggle with their tax obligations and as the IRS eases its policies on tax liens,” says Rada. “Unfortunately, many asset-based lenders don’t realize this because they rely on UCC searches as their primary due diligence tool.”
UCC searches detect only tax liabilities with liens issued against them. Because it frequently takes a year or more for the IRS to issue a lien, UCC searches can inaccurately show that a business has a clean record even though it may owe the IRS hundreds of thousands in tax liabilities or have missing tax returns.
Corporate tax liabilities have been on the rise since 2007 and the IRS reported earlier this year that it expects the pattern to continue as the economy remains soft and businesses struggle to meet payroll demands. Tax liabilities are one of the biggest indicators of credit risk but until Tax Guard developed a method for uncovering liabilities prior to a lien, asset-based lenders had no way of knowing that a significant percentage of them existed. The Tax Guard Liability Index is designed to shed light on the real risk asset-based lenders face.
To receive monthly updates of the Tax Guard Liability Index, visit www.tax-guard.com and subscribe to Tax Guard’s newsletter.
David Bohrman, Tax Guard, Inc.
303.953.6361; dbohrman@tax-guard.com
Kara Dullea, Details Public Relations
864.275.3331; kara@detailspr.net
Established in 2010, Tax Guard is the only tax compliance monitoring company in the U.S. that works with lenders to expose credit risk in real-time before it becomes public information. Using a proprietary, patent-pending process, Tax Guard provides due diligence and tax monitoring services to factors and other asset-based lenders across the United States. Tax Guard is a privately held company headquartered in Denver, Colo. For more information, visit http://www.tax-guard.com, email info@tax-guard.com, or call (877) 550-6325.
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