Resolving Tax Debt for Small Businesses

We hate to be the bearers of bad news, but if you have severe tax liabilities with the IRS, your business could be in serious trouble. Once small businesses begin to accrue tax debt from previous years, they often find it difficult to get back into compliance. The IRS is notorious for their aggressive collection measures and isn’t known for leniency once businesses become delinquent with their debts.

Pyramiding of employment taxes is a fraudulent act that occurs when a business withholds taxes from its employees but fails to send those funds to IRS. Many times they are so behind, the business uses those withholdings to continue to operate with intentions of paying the IRS later. However, this is a highly illegal practice, and once you start on this path you are headed for trouble.

In fact, depending on your circumstances, the very existence of your business might be in peril. This isn’t meant to scare you, but you should be aware of the stakes, and we encourage you to clear up your tax liabilities as soon as possible. If you resolve to take a proactive approach and follow the suggestions below, you could eliminate your company’s outstanding tax liabilities sooner than you might think.

Confront Your Tax Problems Head On

The longer you put off confronting your tax issues, the more serious and expensive your debts will become. Maryland tax debts compound at a rate of 13% (plus penalties and interests), and the IRS’ calculations are based on numerous factors. In addition, federal law gives the IRS substantial legal authority to adopt aggressive collection measures, including property seizures, wage garnishments, and even foreclosure of your business.

Further, the IRS doesn’t even need to go through the court system to implement these collection methods. In most instances, all they are required to do is send a “demand letter,” and in certain circumstances, they don’t have to provide any warning at all.

The more you know about how the IRS operates and the more you express your eagerness to repay your tax obligation, the more likely the IRS may be willing to work with you on a mutually beneficial plan to resolve your tax problem. Do not ignore communications from the IRS, as doing so will likely only worsen your situation.

Better yet, you should hire an experienced and knowledgeable tax representative, such as those at S.H. Block Tax Services, to conduct these correspondences with the IRS directly on your behalf. Additionally, a qualified tax representative can make sure your rights as a taxpayer are not being abused.

Make Good Use of Your Time

Thankfully, it does take the IRS some time to accelerate their collection efforts, which means that if you know you have a tax problem, the time to act is now. Although it could take some time before the IRS assigns a representative to your case, you don’t want to waste your opportunity to get a head start.

RELATED: Small Business Taxes Are a Year-Round Commitment

Initially, you’ll likely receive letters, phone calls, and possibly even an on-site visit from an IRS agent: do not ignore these collection attempts. Tax liens and levies can now be generated by computer, so just because the IRS isn’t literally knocking on your door doesn’t mean they aren’t figuratively lurking in your neighborhood. Therefore, if the IRS is asking for financial information, it’s best to contact S.H. Block Tax Services before responding.

Please understand that IRS revenue officers are not your friend; they are skilled collection agents whose job is to collect money they believe you owe the IRS or the State of Maryland. Do not lie to the IRS under any circumstances, but know that you aren’t required to disclose any financial information without receiving a formal summons.

Determine an Alternative Course of Action and Execute

There are several routes that you can take on behalf of your business to alleviate your financial distress and resolve your tax debt.

• Payment Plans: If you have been quick to respond to the IRS’ attempts at reaching you, they will likely be more willing to grant your request for a payment plan. However, please bear in mind that interest and other penalties will continue to accumulate until the debt is paid in full. If you owe upwards of $50,000, the IRS will most likely file a federal tax lien against you, even if you enter into a payment program. There are ways to avoid this, but it can be difficult to obtain waivers of this nature. You should contact S.H. Block Tax Services before attempting to negotiate with the IRS on your own.

• Offer in Compromise: An Offer in Comprise allows eligible small business owners the opportunity to lower their tax liability, but only if they are unable to repay their debt in full. Negotiating an Offer in Compromise can be a somewhat lengthy process, but if the IRS has real doubts as to whether it will be able to collect the full amount, your business could save a great deal through this arrangement while becoming fully compliant with the IRS. An Offer in Compromise can also be used by individuals and businesses to challenge the facts and contest their debt.

• Uncollectible Status: Businesses that are experiencing serious financial hardship can request to have their accounts labeled as “uncollectible.” This essentially means that the IRS will suspend collection efforts for a specified time period as long as your tax liability is listed as “uncollectible.” The IRS or State of Maryland will continue to monitor your account during this period. If your finances change or if you expect them to change, it might be in your best interest to seek council regarding the next steps. Again, taxes and penalties continue to accrue until your outstanding tax liability is resolved.

• Bankruptcy: Small business owners might be eligible to file for Chapter 7 bankruptcy in order to eliminate repayment, but successfully filing still does not discharge previous tax liens ― all of which must be paid off before selling your property. Contact S.H. Block Tax Services today to learn more about the process for filing Chapter 7 and how it may help with your small business tax problems.

Take Steps to Eliminate Your Tax Debt Today!

The tips and suggestions above can help your small business get back on the track toward IRS compliance, but resolving tax liabilities can get complicated in a hurry ― especially if the IRS is sending threatening letters, making repeated phone calls, or disturbing your place of business. Therefore, the best course of action is to obtain a free consultation from a reliable tax resolution firm like S.H. Block Tax Services. You can do so by contacting S.H. Block Tax Services immediately at (410) 872-8376 or completing the brief form on this page.

We have our clients’ best interests at heart, and we are committed to finding the best possible solution to your tax problems. We would love the opportunity to help, but the IRS imposes strict deadlines, so please call today to get started!

The content provided here is for informational purposes only and should not be construed as legal advice on any subject. Please read our full disclaimer here.