Dealing with a tax debt is a worry your small business could do without, especially if you’re already struggling to make a profit. But, there are strategies that can help alleviate the load and ease your stress. Whether you owe money for local, state, or federal taxes, taking a few simple steps might be all that’s needed to keep your entity solvent.
Don’t Ignore the Problem
At first, denial might seem the only choice. While you may enjoy a moment’s respite, it’s just delaying the inevitable, which is that the Internal Revenue Service (IRS) pursues defaulters to recoup what it is owed. Accept the outcome and focus on your next move. Even if the IRS doesn’t come at you straight away, it will eventually and in that time, the interest and penalty fees will quickly accumulate.
It’s advisable to work cooperatively with the IRS. Reach out to the agency if you get behind in your payments and be forthcoming with requested documents. But, also make sure they’ve got the numbers right by closely reviewing all IRS correspondence. If there are any mistakes, a tax professional should be able to isolate them quickly, potentially reducing your debt and saving money.
Devise a Plan
The second step is to strategize. Work out a plan of action, even a basic outline, and commit to it. The collections process isn’t usually a speedy one so use the time to research your options. Bankruptcy may be a last resort, but you won’t be any worse off for simply having explored it. Your business can also apply for “uncollectable” status, which provides temporary protection but won’t prevent the interest from adding up.
Find out if an individual has been assigned to your case and reach out to establish a human connection. An agent may be more understanding if your company demonstrates a personal element. Another possibility is to request a filing extension of up to 120 days.
Ask for Help
You’re not alone if you’re finding it difficult to meet your tax obligations. The IRS wants to be paid, so to help you make those payments, the IRS has developed tax relief initiatives. All you have to do is apply. The Fresh Start Program aims to assist by offering reprieves on penalties and tax liens. Monthly payment plans known as installment agreements can be arranged, or an offer in compromise could even wipe off a large portion of your debt.
Proof of reasonable cause for your financial predicament, such as significant revenue loss, will go some way towards supporting any claim you make. You can’t be punished for posing a question. If you are offered help, make sure you’re comfortable with the terms of the arrangement. A tax accountant may prove an invaluable source of knowledge during this process.
Business tax debt can feel like an overwhelming, immovable burden. By taking a few simple steps you can save yourself a lot of stress and take control of your payment plan. You may even be able to reduce what you owe or pay it down faster than anticipated. Professional advice is recommended and don’t be afraid to ask for help.