Tax season is widely recognized as one of the busiest times for business owners. They gather financial documents, expense reports, and receipts, and check everything to ensure accurate reporting and compliance. Many business owners also seek the assistance of accountants to prepare and file their tax returns, which can also be time-consuming.
After finalizing their company's tax return, business owners often discover they owe money to the Internal Revenue Service (IRS). Approximately 22% of all businesses have outstanding tax debts to the IRS.1 If you find yourself in this situation, it is important to take prompt action to prevent late fees and penalties, regardless of the amount owed. This Huddle Business Capital blog post features 5 practical tips to consider if your business has tax debt.
Finding out that you owe a significant amount in back taxes can be stressful. Fortunately, a qualified business accountant or attorney has the expertise and knowledge to help resolve your business tax debt. They can help you understand your options, negotiate with tax authorities, and develop a plan to settle your debt that minimizes the financial impact on your business.
If you're unable to pay your entire business tax return, you can visit the IRS website to set up an online payment plan. The IRS offers qualified business owners both short-term payment options (for 180 days or less) and long-term payment options (with monthly payments through an installment agreement).
These plans take into account the total amount of business taxes owed, including any penalties and interest. Plus, they are structured to minimize your financial burden.
If your business owes money to the IRS and you are unable to pay your debt while covering basic living expenses, you can request that your account be placed in currently not collectible (CNC) status. When your account is in CNC status, which is temporary, you still owe business taxes, along with any penalties and interest.
However, the IRS will not pursue collection efforts against you during this time. Keep in mind that the IRS will periodically review your company's financial situation and will request you to pay your outstanding tax bill when you can do so.
Various financing options can help meet your business tax obligations. These include short-term working capital loans, business lines of credit, and SBA "Express Loans," all of which are available to qualified business owners through our network of top-tier lenders at Huddle Business Capital.
Obtaining a business loan or line of credit can be beneficial if you require funding to cover your business taxes. This financial support can enable you to meet your business tax obligations without neglecting your company's operational expenses or delaying growth initiatives.
If you receive a notice from the IRS regarding your business taxes, read the details to understand what information or actions are required. Make sure to gather any documentation to support your response, and adhere to any deadlines in the IRS notice. Prompt responses can help resolve issues and reduce the risk of further complications.
It's important to recognize common factors that lead to tax liabilities. By understanding these causes, you can better prepare to avoid potential tax-related issues, such as penalties, interest, tax liens, and asset freezes.
Inadequate record-keeping - Without accurate and complete documentation, it can be challenging to file business taxes correctly, leading to tax liabilities.
Accidental mistakes - Simple errors during business tax preparation, such as mathematical mistakes or incorrect data entry, can lead to tax assessments that a business may struggle to repay.
Failure to pay estimated business taxes - Many businesses are required to make estimated tax payments throughout the year. Failing to do so can result in a large tax bill.
Changes in business tax law - The IRS tax laws for businesses can change frequently, and business owners who are unaware of current tax regulations may face unexpected tax obligations.
Not hiring a tax professional - Business owners who file their tax returns themselves may inadvertently make errors or overlook current business tax laws and regulations.
1 - https://tax-guard.com/blog/1-in-5-small-businesses-owe-money-to-the-irs-and-what-this-means-for-commercial-lenders/
This Huddle Business Capital blog article is purely educational and contains general information and opinions; it is not intended to provide advice or recommendations of any kind. Huddle Business Capital is not affiliated with nor endorses the companies mentioned in this article.