The IRS has various ways to collect back taxes. If your small business owes back taxes, it is subject to tax penalties and interest and will not get away with not paying them.
If you do not have all the money to pay them, it may be comforting for you to know that the IRS may threaten to close down businesses but it hardly ever does so. As long as you co-operate, working out a solution to your business back taxes is possible.
Keep communicating with the IRS
If you are behind on your business taxes and you want to stay in business, ignoring the IRS is the worst thing you can do. Even if they do not follow up with you for a while, they will always come back.
The longer you put off paying back taxes, the more your tax debt grows due to penalties and interest. The IRS has power given to it by Congress to collect taxes so you only need to receive a letter of demand before it acts. It can seize your business assets and close it down.
Fortress Tax Relief offers tax resolution services and will intervene with the IRS on your behalf and help you to resolve your back tax issues with favorable terms.
You have time to strategize
The IRS is often slow to react, which gives you time to take action. As the IRS has limited personnel, it usually resorts to various other measures before assigning a human being to your case. You may receive many tax bills and telephone calls before you actually have to confront a tax collector face-to-face.
Every year the tax collection system is getting faster, however, and you cannot afford to relax because you think you have plenty of time. Remember, you do not have to disclose anything about your assets or finances to an IRS collector unless you receive a formal summons.
Ask for a payment plan
Consider asking the IRS for a payment plan. Most businesses that owe back taxes are allowed to pay off their old tax debt in monthly installments. It is important to set up an installment agreement with monthly payments you can afford. If you default on an installment agreement, the IRS will be less inclined to allow you to set up another one.
Request an offer in compromise
Requesting an offer in compromise can be a lengthy process. The business owner needs to fill out an IRS form providing detailed information about the financial status of the business and request that the IRS accepts only a percentage of what the business owes.
The IRS is likely to accept the offer if it believes that accepting a compromise is better than not getting anything at all.
If you do not qualify for such an offer, you can reduce the amount you owe to the IRS by obtaining an Abatement of Penalties. To obtain this, you need to make a formal request with a persuasive argument for reasonable cause and documents to back it up. It helps to have an experienced attorney to assist you with this.
The last resort
If your business is in a truly dire position, the IRS may temporarily give you “uncollectable status,” which means it will leave you alone for some time.
It will not actively engage in any collection efforts during this time but you will still owe the back tax and penalties and interest will continue to accumulate. As a last resort, you may consider filing for bankruptcy, which can wipe out some of your tax debt.