Given how many different balls that business owners have to keep in the air, it’s not surprising that sometimes, things get lost in the shuffle – even vitally important things. These can even include failing to file payroll taxes on time. As stressful of a situation as it may seem to be, there are ways for you to settle your tax liability and get your business back on track.
There is one thing that you should keep in mind about trying to make IRS and state tax settlements. Just as is the case with individual taxpayers, some types of tax settlements are going to be very difficult (if not impossible) to make if you have assets which may be sufficient to cover your tax liability. In other words, if your business is still open, there’s a very good chance that you’re going to end up paying the entire amount of your back taxes, possibly along with interest and penalties.
In fact, it’s generally the case that if your business hasn’t closed (or if it’s currently going through bankruptcy proceedings), you won’t be eligible to settle your back taxes under an Offer in Compromise settlement. You may have heard about these arrangements in regards to individual taxpayers looking for IRS and state tax help. An Offer in Compromise allows individuals and businesses without sufficient assets to settle their tax liability for an amount which is smaller than their total back taxes, but that the taxpayer can afford.
This doesn’t mean that you can sell assets to raise money for your back taxes (since the proceeds of these sales are also considered to be taxable, this won’t help). You also can’t give away assets – since the IRS and state tax authorities can seize assets from third parties to satisfy your back taxes.
What it boils down to is this: if your business is still open, the best way to make an IRS or state tax settlement is to either request an extension of time to pay or to negotiate an installment payment arrangement. The IRS offers both 90 day and 24 month installment plans, with the total amount your business will have to pay being less for a 90 day plan. Keep in mind that you’ll need to pay 20% of your back taxes up front.
Of course, if you just need some more time to pay your back taxes, but think that you might have a chance of being eligible for an Offer in Compromise settlement, it may be well worth contacting a CPA, tax attorney or enrolled agent to discuss this option. None of this is necessarily easy and if you’re trying to negotiate a settlement with the IRS or your state Department of Revenue, it’s definitely advised to get professional advice and/or representation. You’ll need the insight of an expert to find out what options are the best fit for your business and how to proceed, but the expense will be far better than risking losing your business through penalties and having your businesses’ assets seized to satisfy its tax liability.
We all make mistakes, but as a business owner, mistakes can be especially costly. If you’ve failed to file payroll taxes on time, you shouldn’t make the mistake of failing to seek professional advice and IRS or state tax help.
Have more questions? The Your Tax Clinic Team is more than happy to help! Call us now for a FREE Tax Solution Consultation (855)220-0770