Smart Money: Take business tax woes to accountant

Bruce Williams is a national radio talk show host and syndicated columnist.

Dear Bruce: In 1999, I bought a hot dog cart for my wife to make some money. With no experience, some big mistakes were made. She only worked it a half dozen weekends at Little League games. She kind of kept track of sales so as to pay sales tax, but that was it. No records of sales or purchases. When it came time to file state and federal taxes, we found out we had messed up.

I panicked and didn't file taxes and haven't filed them since. We have not used the hot dog cart since that time. I have been petrified thinking about what the IRS will do to us. I want to get this settled in some way. I am a truck driver and we make enough money to live on, but have nothing extra. We have no savings. Reader, via e-mail

Dear Reader: I doubt the IRS or the state is going to slap you in irons. That does not relieve you from reporting the money that she made. Since she only worked a half dozen weekends that has to be very little. I'm sure that any accountant could file an amended return to show what little net income there might have been and a return to the state for the little bit of sales tax that is due.

As a practical matter, you might determine what statutory limitations existed regarding sales taxes. It's possible that this time frame has already passed. There is no reason to be petrified. I think you would feel better if this was straightened out, and almost any competent tax accountant can handle that. I'm not talking about a guy who operates out of a storefront. I'm talking about an accountant that practices before the IRS.

Dear Bruce: I have an incredibly good, if I do say so myself, idea for a unique type of shoe that would be popular with women of all ages, almost any lifestyle, around the world.

The shoes would be easy and inexpensive to manufacture but would sell at a very large profit. I have the marketing strategy all figured out. The shoe design is all set to go, I just need the capital to have the shoes manufactured and shipped to a U.S. warehouse.

I have some background in clothing design, manufacturing and sales, as well as marketing and journalism. It would take about $30,000 to get the shoes manufactured and on the market. I would not qualify for a loan from a bank. Any suggestions as to how I can obtain the capital? Reader, via e-mail

Dear Reader: I always encourage people to think of ideas for new products, but there are several things in your letter which give me clues as to a lack of knowledge in these areas.

As soon as you start saying "at a very large profit" I get nervous. What appears to be a large profit to amateurs can be a loss after all of the expenses are in place. Capital of $30,000 to have things manufactured, shipped and marketed is just unrealistic.

You say you would not qualify for a loan from a bank. Banks are not in the venture-capital business. A major thing that disturbs me is your unrealistic take on capital requirements. Undercapitalization can destroy an enterprise, and when you start talking about manufacturing a product, taking it to market and shipping it for a very tiny amount of money, anyone you approach for capital is going to run, not walk, to the nearest exit. You might want to try and rethink this one more realistically.