Owing taxes to the Internal Revenue Service (IRS) is not a situation small businesses want to find themselves in. Owing back payroll taxes is much more serious then owing back income taxes. Fortunately, the IRS wants to find ways to get payment without closing businesses. The sooner a business owner starts working with the IRS to resolve the situation, the less costly and stressful it will be.
The IRS has programs to assist business owners who are financially unable to pay all back taxes, penalties and interest immediately including payment plans, offers in compromise or, in dire situations, bankruptcy. Review all the options available and talk to a tax adviser to choose the best solution.
According to Nolo.com, a website with legal forms and general business legal information, “Congress has given the IRS enormous legal powers to collect past due taxes. The IRS can seize just about anything that you own -- including your bank account, home, and wages. And the IRS doesn't need a court order or judgment before closing your business and grabbing your property. In most cases, the IRS only has to send you a form “demand letter” before it acts -- and, in special cases, it isn't compelled to give you any warning at all. The IRS can effectively close down your operation by seizing your assets -- business accounts, desks, inventory -- and padlocking your doors.” As long as the debt remains unpaid, penalties and interest will continue to accumulate. The IRS website, www.irs.gov has helpful articles for people who owe back taxes.
Many small business owners find it’s helpful to hire a tax accountant, registered agent or tax attorney to help them resolve issues with the IRS. Having a representative with knowledge of tax regulations might result in a lower debt to the IRS or a better payment plan. To find a tax representative, visit www.aicpa.org or the state registry for accountants or ask for a referral from business associates. Beware of scams that promise to wipe out your tax debt, these are not legitimate options. A couple questions to ask before engaging an accountant: Do you have a preparer tax identification number and what is your tax background? Be sure to ask about prior experience with the tax situation being addressed.
Ignoring tax debt does not make it go away, it only makes it more expensive with penalties and interest. For assistance check into the Taxpayer Advocate Service https://www.irs.gov/Advocate or contact your accountant.
The SBDC is a partnership of the U.S. Small Business Administration, the Oregon Small Business Development Center Network, the Oregon Business Development Department and Southwestern Oregon Community College. Arlene M. Soto has been the Director of the Southwestern Small Business Development Center since July 2007. To ask a question call 541-888-7001, e-mail firstname.lastname@example.org, or write 1988 Newmark Ave., Coos Bay, OR 97420. Additional help is available at the OSBDCN Web page www.bizcenter.org.