Which Income Tax Resolutions Are Available for Businesses?
As a business owner, taxes must be paid to keep your business profitable and afloat. If business taxes are paid late (or not at all), you’ll end up owing more money due to interest and penalties. When owing back taxes, the IRS may send a notice of intent to levy or place a lien on the business’s assets.
A levy means the IRS seizes assets such as cash and payments. When the IRS puts a lien on assets, the business cannot sell those assets until the tax debt is paid. The IRS may publish liens online and in newspapers, which could cause you to lose customers. Business owners may also be subject to criminal charges if the IRS suspects tax evasion.
Get Professional Help
Communicating with the IRS to reach a tax resolution can be overwhelming and stressful. You may also not be aware of the different options available to pay your tax bill. The key to a successful tax resolution often includes responding promptly to IRS notices and hiring professional representation such as tax lawyers. Your attorney can guide you through the tax resolution process and review the possible payment options.
Installment Payments
When confident that you can pay overdue taxes over an extended period, you can apply for a payment plan. If the company owes more than $10,000, the IRS will collect payments by direct debit only. However, an installment plan will not stop the IRS from adding fees to your tax bill.
Penalties and interest accrue until the business pays the full balance of the outstanding tax debt. You can apply for an installment plan online or by phone. Setup fees apply, and using the online application can save you money. You may also need to provide the company’s financial statements.
Offer in Compromise
The IRS may accept an offer for less than the full amount the business owes in back taxes. The IRS will accept this Offer in Compromise when the government agrees that the company is unable to repay the amount due. This option is not always available, though. The IRS will conduct a thorough review of the business’s assets, income, asset equity, and expenses before accepting an Offer in Compromise.
Currently Not Collectable
If a business owner suffers a hardship, such as closing the business due to illness, the IRS may temporarily stop the tax collection process. In these cases, the IRS may consider the account currently not collectible. The company is still responsible for the full amount due, and interest and penalties will continue to accrue during the delay. The IRS may place a lien on the company’s assets to ensure payment. The IRS will resume collections when the situation changes.
While the IRS offers different tax resolutions, business owners may find it difficult to negotiate the best settlement possible. Respond to any IRS notices promptly to avoid additional charges. Hiring a third party to assist you can also help achieve a successful outcome. You’ll have more time to focus on running the business, keeping your doors open, and earning money.
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