Here’s What You Need to Do If Your Business Has Tax Debt
Starting as a small business, there may be times when you find it difficult to manage your finances. This could result in tax debt, and while it may seem scary and daunting, this does not mean the end for your business.
Dealing with the IRS if you have tax debt does not have to be a lot of trouble. As long as you are familiar with the ins and outs, you should still be able to go on. In this article, we will guide you on what to do with tax debt.
Talk to IRS
It may be tempting to try and avoid them if you have tax debt, but this is one of the worst things you can do if you have tax debt. If you ignore them, they might get off your back for a while but they will be coming back. Plus, by ignoring them, you are allowing your interest and debt to bubble up, but if you talk to them, you may be able to discuss a payment plan or discount with them.
Be Honest with the IRS
This is not to say that you should disclose everything because as much as possible, you shouldn’t. As long as the IRS does not ask for certain pieces of information, most of the time it is better to keep them to yourself.
However, if the IRS does start asking certain questions, you should be honest with them. Lying could get you and your business in serious trouble. Provide the information requested as honestly and accurately as possible. Make sure you also have evidence to back up your statements.
Ask for a Compromise
As mentioned above, you can talk to the IRS about a possible payment plan or discount on your tax debt. However, you can also ask for a compromise, which means they will waive a certain part of your debt.
While this may not seem likely, it happens for many businesses wherein their debts are greatly reduced. This is because the IRS believes that this is not going to be a repeated incident and that it is in their best interest just to collect what is available at that moment, instead of constantly having to return to you and try to collect what you owe them.
This compromise request will require you to file for it formally. It is a lengthy process, and it is best to inquire with the IRS first about how it’s going to happen before you decide to file for it.
The truth is, bankruptcy won’t bury you in debt; by filing for it, you may have some of your debts erased instead. If you are out of options, then you may want to consider filing for bankruptcy. While it may not be the outcome you expect, it can possibly help you get up from rock bottom.
Filing for bankruptcy is a complicated process and has a lot of rules. But it is still worth considering if you are running out of options with your tax debt.
Having tax debt can be scary and overwhelming, but it is not the end of the world. If you aren’t sure how to deal with it, remember the tips we mentioned in this guide and you should be able to find yourself slowly out of debt.
Dealing with taxes and finances while running a business can be tiring. With Ash CPA, you don’t have to worry about those because we offer accountant and tax services in Framingham, MA. Focus on growing your business and leave the financial aspects to our experts!