Small Businesses & The IRS: How to Handle Back Taxes
Owing back taxes to the IRS can be a very daunting problem for small businesses around the country, especially at a time in which many of them are trying to dig out of tough economic times. Fortunately, in most cases, a small business can often navigate a plan with the IRS. But this can be tricky. We have outlined several important things to remember if your small business is behind paying taxes:
1. Communication is Key
If you have received correspondence of any kind about back taxes from the IRS, you should respond. Ignoring the notice from the IRS will do nothing but make matters worse. While you might buy yourself a little bit of time, you will hear from them again and the fees and penalties will be even higher. If you ignore the IRS long enough, they can issue what is called a “demand letter” which is a signal that they will soon come after your assets, which can quickly shut down your business. So, be as up front with the IRS as you can, communicate clearly, respond to their questions, and provide necessary information. It will save you time and money down the road.
2. Use Your Time Wisely
Fortunately for you, the IRS collection process is extremely slow. While that does not mean you should ignore their correspondence, you can use this time to your advantage. This can mean strategizing about how you will pay your debt, what kind of help/support you need and what you can put in place to resolve the issue. Again, do not wait too long to respond – the IRS does not forget!
3. You Have Options
You may have more options for paying your debt to the IRS than you think. You can ask the IRS for a payment plan or even to reduce the amount that you owe. There are times in which the IRS agrees to an installment plan, which allows you to pay off your debt over time (keep in mind that interest and fees are still accruing). You may also negotiate to pay less than you owe – sometimes called an offer in compromise – but there are very strict guidelines and restrictions for this agreement. If the IRS thinks that getting less from you is better than getting nothing from you, they just may grant this to your small business.
4. Dire Situations
Some situations call for more drastic measures. If your business is in terrible financial trouble, you may want to consider requesting “uncollectible status” which means that the IRS does not pursue your debt for a period of time. You can also consider filing bankruptcy, which could erase some of your small business’s debt. Again, these are last resort options that are often complex and require support and assistance.
5. Professional Help
Back taxes can be complicated and may require the assistance of a tax firm that can help you navigate this process. A tax firm can review documentation, previous returns and can give you sound advice about the best way to move forward. They can also help by managing all communication with the IRS on your business’s behalf.
Success Tax Relief has extensive experience working with small businesses to resolve issues related to back taxes. If you are a small business owner and would like some advice, support or guidance, contact Success Tax Relief today.