Whether you are in the first few years of your business or have been operating for a decade or more, circumstances can leave you with tax debt. When you don’t deal with the money you owe the IRS, you risk them shutting down your business. Fortunately, you can have barrels of fun dealing with the IRS because they really do not want to close your business. Instead, they would rather you take care of your debt on your own or make some kind of arrangement with them. That’s why learning how to deal with small business tax debt is important.
At Silver Tax Group, we know that dealing with your business’s tax debt does not fall on your top 20, maybe even 50, ways you would like to spend your time. Yet, you need to protect your business and its assets. We are here to help you through the drudgery, but first, check out these six ways to deal with your small business tax debt.
Don’t Avoid the IRS
It’s tempting to ignore notices from the IRS about your business tax debt. After all, out of sight is out of mind, and when you don’t think about your tax debt you don’t stress out about it. Yet, avoiding letters or uninvited visits from your favorite IRS Revenue Officer won’t help your situation.
Remember that as you avoid your business tax debt, your penalties and interest continue to add up. In fact, interest compounds daily, creating a larger and larger debt for you to ultimately deal with. Additionally, the IRS has the power to seize your assets, which they may or may not inform you of in one of their special letters. If you make no effort to communicate with the IRS about your tax debt, you can be sure they will eventually shut down your business.
Cooperate with Your Assigned Revenue Officer
The IRS typically assigns a Revenue Officer to your case, who is responsible for making sure you have filed all your returns and for figuring out how the IRS can collect money from you for your business tax debt.
Depending on the exact situation and the timeline involved, the Revenue Officer typically provides one or more deadlines for a business owner to meet. Not only should you make meeting those deadlines a priority, but you should also cooperate by giving the Revenue Officer the financial information he or she needs about your business. If you question whether or not the officer actually needs certain financial information, consult with a tax attorney. Full disclosure isn’t always best for you, nor is it always necessary.
Handle Small Business Tax Debt Yourself
If your small business tax debt is not that large, you should handle it yourself. Find the money where you can and pay your debt ASAP to avoid having to deal with the IRS. A good rule of thumb is around $10,000. Many business owners can quickly satisfy debts under $10,000, even if it means selling off an asset or borrowing the money for a variety of sources. This will eliminate additional accrued interest and prevent you from having the IRS comb through all of your financials.
Also, the IRS moves as fast as a turtle when it comes to collections. You can often satisfy these small debts without having to deal with a Revenue Officer or any other IRS representative face-to-face.
Hire an Attorney When You Have Large Tax Debt
If you have a large business tax debt, an attorney can help. When you owe tens of thousands or more in back taxes, it’s actually in your best interest to hire a reputable tax attorney to negotiate with the IRS for you. Your attorney fees will typically be far less than what your lawyer can save you. The IRS has a few different resolutions, discussed in more detail below, and a qualified tax attorney can often negotiate better terms. A tax attorney can also help ensure the IRS doesn’t assess a tax lien against you and ruin your credit rating. At Silver Tax Group, we help small business clients with tax debt and have a proven track record of success.
Negotiate a Resolution with the IRS
If you are in compliance with the IRS to the extent that you have filed all of your taxes, you can negotiate a resolution so the IRS will close your case. Resolutions usually come in one of the three following forms:
- Payment Plan. Like any other payment plan, one with the IRS requires you to pay a certain portion of your business tax debt on the specified deadlines you agree upon with your Revenue Officer. In some cases, you might be able to negotiate a discount on interest and penalties.
- Offer in Compromise. An offer in compromise gives you the opportunity to settle your tax debt without paying the full amount. If you cannot pay all of your back taxes or you suffer hardship as a result, the IRS will consider this resolution. You have to fill out forms to make an offer. If the IRS approves your offer you can pay in one lump sum or choose periodic payments.
- Uncollectible Status. Sometimes business owners know they owe the IRS money, but they have no feasible way to pay their debt. In these cases, the IRS may assign you as “Currently Not Collectible” (CNC). The IRS typically will not try to collect money from you while in CNC status, but interest and penalties will continue to accrue until you satisfy the debt.
Consider Filing Bankruptcy
Bankruptcy should always be a last resort. Many will tell you that filing bankruptcy does not erase tax debt. This is true in many situations, but bankruptcy can eliminate some tax debt. Bankruptcy and tax laws are complicated, especially where they intersect. If you are considering bankruptcy and you owe a significant amount of money to the IRS, you should consult with a reputable tax attorney to learn about the best course of action for your business.
Contact Silver Tax Group to Deal with Your Business Tax Debt
Contact us to speak with a tax attorney who can help you with your tax-related needs, including dealing with your business tax debt and putting your company on a better path in the future.