Business Owners: Owe Back Taxes?
October 3, 2023
Actionable Steps for Facing IRS Debt
Entrepreneurship can be hard. Some years are good, others are not so great. But every year, like clockwork, the IRS comes calling and asks you for what’s theirs.
Small businesses often face unexpected financial challenges. Among the scariest of these challenges is unpaid taxes. Although the IRS may appear patient initially, resting on one's laurels can be a perilous decision. Once the IRS gears into action, it is known for its relentless pursuit and uncompromising measures. It is the most brutal collection agency on the planet.
So, if you find your business in this situation, it's paramount to be proactive. Here is a comprehensive guide to help you correct the course.
Note: If the IRS is claiming you owe $10,000 or more, contact our firm
immediately for a consultation and learn about your tax debt relief options.
Do Not Ignore The IRS
The first step is paying attention and taking action. You might not agree with the IRS but you can’t leave them in your pile of unread mail, or worse unopened mail. Recognize the gravity of unpaid taxes and understand that it's a liability that won't just dissipate. The sooner you confront reality, the better you can strategize a solution.
Open Lines of Communication
Ignoring IRS notices can exacerbate your situation. Instead, get proper representation from a qualified tax relief firm and have them engage with the IRS on your behalf. Firms like ours have dealt with the IRS many times before. Timely responses showcase your commitment to resolve the issue and the right firm will guide you through every step of the process.
Owing 941 payroll taxes is double jeopardy. Not only can the IRS levy and lien your business income and assets, it can pierce the corporate veil, without a court order, and go against you personally.
Understand Penalties and Interest
Unpaid taxes don't just stay static; they accumulate penalties and interest over time. With current IRS interest rates hovering at 8%, compounded daily, each day you procrastinate is costing you big time. Familiarize yourself with the accruing amounts to grasp the full scope of your liability. The more time you let pass, the higher the penalties and interest will be.
Consider Installment Agreements
The IRS often allows businesses to pay their tax liabilities over a period in monthly installments. If you can demonstrate genuine inability to pay the lump sum, they might consider an installment agreement. This can help in managing cash flows and ensuring business operations aren't severely disrupted.
Offer in Compromise (OIC)
In specific circumstances, the IRS might accept a reduced amount to settle the entire debt. Known as an Offer in Compromise, this option is contingent on demonstrating you cannot pay the full tax liability over the remaining 10-year collection statute. The right tax resolution firm will help you explore this option if you’re qualified for the program.
Temporarily Delay the Collection
If your business is in a dire financial situation, the IRS might temporarily delay its collection efforts. While this offers a short-term reprieve, it's essential to use this time wisely and strategize a long-term solution.
Seek Professional Assistance
Engaging with a tax resolution firm can be invaluable. They can guide you through the intricacies of tax laws, help keep your business open, negotiate with the IRS on your behalf, and help formulate a plan tailored to your unique circumstances.
Preventative Measures
While addressing current unpaid taxes is vital, implementing systems to avoid future discrepancies is equally crucial. Regularly review your finances, maintain clear records, and stay updated with tax regulations. Make quarterly estimated payments and be proactive throughout that year by creating a concrete plan with your qualified tax resolution professional.
Unpaid taxes are a looming storm cloud for any small business owner. While the IRS might seem lenient initially, its eventual intervention can be formidable. By acknowledging the debt, communicating promptly, understanding your options, and seeking professional guidance, you can navigate these challenges effectively. Remember, in the realm of taxes, proactive action is always better than reactive measures.
If you are facing IRS problems and owe $10,000 or more in back taxes or are being audited, reach out to our tax resolution firm, and we will schedule a free and confidential consultation to explain your options thoroughly and help you permanently resolve your tax problem.
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Tax season started in late January, but the IRS’s latest statistics show that many Americans are still waiting to file their taxes. As of February 7, 7.7% fewer tax returns have been received by the agency compared to a similar time frame last year, according to its latest data release. While the IRS expects filing numbers to even out, the IRS.gov website has experienced a 40% decline in visits this year to date over last year. Francine Lipman, CPA, a tax law professor at the University of Nevada, Las Vegas, says the reasons could be endless but probably come down to simple procrastination. “Despite all the Super Bowl ads, I don’t believe that tax issues are on people’s radar yet,” adds Lipman. This is surprising considering the political climate, says Jordan Rippy, an accounting professor at Johns Hopkins University’s Carey Business School, who expected to see an uptick in returns filed this year. “Given the general climate surrounding the new administration, I would have expected more anxiety in the general population and a desire to receive refunds more quickly,” she tells Fortune. Elon Musk’s Department of Government Efficiency (DOGE) reportedly visited the IRS on Thursday to begin analyzing the agency’s operations. Senator Ron Wyden (D-OR), ranking member of the Senate Finance Committee, later posted on X that “if your refund is delayed, they could very well be the reason.” Average tax refunds are higher this year so far The rise in electronic filing is one of the biggest changes to the tax system in the last decade. With over 90% of individual taxpayers now filing their returns online, the process has become easier to handle for many Americans. But taxpayers still miss out on over $7 billion in underclaimed and unclaimed tax credits and deductions each year. In the 2025 tax season to date, tax filers have received a 18.6% increase in their average refund amount ($2,065) compared to this time last year ($1,741). The IRS cautions this isn’t a perfect indicator of the final trend in tax refunds, since it’s early in the season. The agency says most refunds are issued within 21 days. In the final analysis, the average refund last year was around $3,138. Compared to 10 years prior, last year’s average rebate was down nearly 30% on an inflation-adjusted basis. Rippy says she is surprised that average tax refunds have not decreased more as Americans realize they can adjust their withholdings and get more money per paycheck throughout the year. “If you receive a large tax refund, what you've essentially done is given a loan to the government over the last year that you didn't have to give them, and you've done that interest-free,” says Rippy. At the same time, she admits that the fact that many Americans expect a big refund year after year is a good thing, as it’s a form of forced savings. While many end up saving their refund, others use it to pay down debt, make a home improvement, or go on vacation. Need help filing your taxes or having issues with the IRS? Receive your free consultation from Advantage Tax Relief today! https://www.advantagetaxrelief.net/request-form or by calling (630) 773-3200.
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