In the real world, your company may come across a situation in which a financial statement cannot be signed off because of some problems. For example, conflict from changing the licensed auditor from one house to another often delays the audit process as the old one may refuse to cooperate and return necessary documents. Violating Securities and Exchange Commission rules, such as for a connected transaction, could also be the cause of postponing the completion of the financial statement until the problem can be resolved.
Not filing a financial statement will always lead to the same tax consequence: you will not be able to file a corporate income tax return, as the law requires the audited financial statement to be submitted together with return. This will empower a tax auditor to issue a summons to serve on your company for a tax assessment.
Unlike in a normal situation where a summons needs to be issued within two years (for a general tax audit) or five years (in the case of a tax refund or tax avoidance), the 10-year rule is applied. This automatic extension is the first consequence you face for not filing a corporate income tax return.
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