Unpaid Business Taxes: 5 Steps to Getting Out of Debt
If your business has accrued tax debt over time, you may be worried about how you can possibly pay off the debt without sacrificing the viability of your business. Small businesses are particularly vulnerable when tax problems surface and many end up closing their doors as they cannot stay profitable in the midst of the looming debt to the IRS. Here are some steps to getting out of tax debt without worrying about your business shut down.
Tips to Saving Your Business From Tax Debt
- Do not ignore the IRS: If you have received any written notices about an unpaid business debt from the IRS, you should respond and begin working on a plan.. Ignoring the IRS only escalates the situation and can take it from bad to worse. Penalties and interest begin to increase the debt that you owe. Currently, most tax debts compound at a rate of up to 14%, so waiting to address a tax issue will only put your business in an even more difficult situation.
- Ask for a payment plan or an Offer in Compromise: The IRS can put a tax lien on your property and eventually seize your assets, so your best bet is always to pay your tax debt off as soon as possible. One strategy is to apply for an installment agreement, which means that instead of paying your tax bill in one lump sum, you pay it off over time. This can be much easier for your monthly cash flow and keep your business from taking a big hit all at once. An Offer in Compromise is another program that allows you to pay the IRS less than the full amount due. This process is lengthy and requires detailed financial records but nearly 25% of businesses that owe taxes to the IRS successfully use this approach to pay their debt.
- If your situation is dire, explore other options: If your situation is truly dire, you may want to explore bankruptcy or requesting what is known as “uncollectible” status. Bankruptcy can eliminate some of your tax debt and being put on an “uncollectible” status means that the IRS will leave you alone for a period of time (though you will still owe your debt plus interest and penalties).
- Do not panic: It is rare for the IRS to shut a business down because of unpaid taxes and they always send you notice of their intentions in writing. So, if you are already getting written correspondence from the IRS, act now, before the consequences worsen, but take some comfort in knowing that if you deal with the situation head-on, you will likely be able to work out a solution.
- Get the assistance and support you need: Depending on your business’ situation and the amount of time and effort you have available to take care of your tax issue, you may find the need to partner with a reputable tax firm to help navigate this issues with the IRS.
Success Tax Relief offers an experienced team of tax professionals who specialize in working directly with the IRS to solve difficult tax issues for businesses as well as individuals with back taxes or other tax issues. Contact us today at 877-825-1179 for more information or to schedule a consultation.