What Happens When Your Business Owes IRS And State Sales Tax?

If you owe the IRS or your state government money for business taxes, it is important to understand the consequences of delinquency and failure to pay as well as the options available to pay your taxes. It can be stressful to be in a situation where your business owes money to the government and is not able to pay the money that is owed. However, with a closer look at the ramifications of not paying the taxes as well as by reviewing the options available for settling the debt with the IRS or the state government, you may see that there are some reasonable options that may be useful to you.

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What the Government Can Do to Collect the Money

Before you learn more about IRS tax relief options or state tax relief options, you should first gain a better idea about what the government can do when you owe taxes. In most cases, the government taxation authorities will charge interest on the outstanding balance until the balance is paid in full. The interest rate may be as high as 14 percent, and the interest will be compounded. Because of this, it is generally most affordable to pay your tax bill on time if possible. If you fail to pay the tax bill, the IRS has the authority by law to seize business property as well as personal property. It may also garnish your wages. Tax liens may also be placed on your property. The state collection measures vary by state, but they generally are equally as significant as the IRS methods.

A Look at the Payment Options Available

Whether you have IRS tax problems, state tax problems or both, you may be wondering what you can do to overcome your challenges. There are a few options available for taxpayers to consider. 

Pay Your Bill With A Business Loan Or Liquidate Some Of Your Assets

Here are one of the many uses of your business credit lines or credit cards. This is why it’s so important to have these set up as soon as you set up your business. They not only help you to acquire assets through your business yet also to rescue your business in the event that you get in trouble tax wise.

If you don’t already have them in place, then reach out to your bank or lender and get some credit lines and business credit cards established so you can pay off the IRS or State. Once that’s done, you can then have your business pay down the credit lines and credit cards. This has a dual benefit of not just resolving your IRS or State tax debt yet also building up your business’s corporate credit as well.

Set Up Monthly Installments

Another option is to request a monthly installment payment plan with the government. This option is available through the IRS, and many states also have a payment plan option. There are rules and requirements in place, and the IRS will charge interest on the unpaid balance. Ultimately, you may end up paying more to the government with the installment plan due to the interest and fees, but it will keep you in good standing with the government as long as you make your payments on time.

Consider an Offer in Compromise 

An Offer in Compromise is available for IRS tax problems, and you will need to see if a similar option is available for state tax problems. This is a type of settlement agreement that is available to qualified individuals, and it essentially will reduce the amount of money that you owe to the IRS. If you are interested in this option, you should consider reviewing the checklist located in Form 656, which is the Offer in Compromise form, to learn about eligibility requirements. This option is usually only approved by the IRS if it is in the best interest of both the government and the taxpayer.

Pursue a Currently Not Collectible Status

One option available to taxpayers who are delinquent on taxes to the IRS is to pursue a Currently Not Collectible, or CNC, status. To be approved for this, you will need to file a collection information statement with the IRS, and they will need to approve the request to be granted this status. With CNC, you must prove that paying the taxes would create a financial hardship on you at this time. The amount owed to the IRS is not reduced, but the IRS essentially takes your case out of their active files. The account may remain in a CNC status for as long as ten years. If you are unable to pay the debt after this period of time, the IRS may permanently forgive the debt that is owed. 

These are only a few of the options available to you when you are facing a large tax bill to the state or federal government. You may also pay your taxes using a personal credit card, apply for a personal loan or make other arrangements. With the hefty penalties associated for not paying your taxes or making other arrangements, it is important to carefully analyze the options available to you and to make arrangements in a timely manner. 

What You Can Do Today

People will react in different ways after learning that they owe money to the IRS or to the state government that they cannot afford to pay. Some will immediately seek IRS tax relief or state tax relief. Others will put the issue on the back burner because they fail to understand the true significance of the situation and the ultimate impact that failure to pay taxes can have on their business and on their personal life.

See more about our Tax Help – Tax Resolution Solutions 

As soon as you learn that you have a tax bill that you cannot pay to the IRS or to the state government, it is important to explore the options and to develop a plan. The time to act is now, by either hiring an attorney, CPA or a tax resolution firm like Cooper’s Accounting Service to represent you in the matter.

Want to know more about how we can help you resolve your IRS or State Tax problem?

Call now for your FREE ‘Tax Help’ Consultation – (562) 436-2600