What to Do When Your Business Owes Back Taxes

Running your business takes a lot of time and effort. Tax professionals can take care of this side of the business as you concentrate on bringing in clients and expanding your business

If you are a business owner, you may have too much work so that tax deadlines catch you off-guard. As such, it’s not uncommon for the stressed-out small business owner to owe back taxes at some point during your career. After all, a small business owner needs to itemize deductions and complete the IRS 1040, Schedule A, Schedule C, and Schedule E forms, among other documents. Besides being time-consuming, navigating these documents can easily result in errors that can cost you heavily.

But what do you do when you find yourself in this predicament? In fact, it’s estimated that nearly 22% of small business owners didn’t know their effective tax rate back in 2016. Here are some of the best ways to cope with your tax debt.

Don’t ignore the IRS

One of the most tempting things to do when you receive a notice from the IRS is to ignore it. After all, you’ll get it done at some point, right?

Ignoring the IRS is the worst thing you can do for your business. This can cause your business to get in even more trouble. Always respond to these letters, which will only be sent to you by mail.

Consider your options

The IRS will offer you a number of options to pay back taxes. You can either establish a payment plan, offer a compromise, or request a temporary delay if you cannot pay back your tax debt. A payment plan works wonderfully for small businesses who want to take out a loan or pay back the IRS in monthly installments. A compromise will likely allow you to pay less, but the requirements may be more strict. A temporary delay will only be offered if you and your tax professionals are able to fill out a Collection Information Statement.

Before you agree to any of these options, the best thing you can do is have an audit performed. The IRS is not infallible and it might make mistakes. Ensure your tax information is up-to-date to find any holes that may have occurred in your information.

Rely on the help of a tax professional

Running your business takes a lot of time and effort. Tax professionals can take care of this side of the business as you concentrate on bringing in clients and expanding your business. They can also assist with audits, save you time, and help you better plan for the future. If you’re staring at accumulating back taxes, rely on tax professionals to resolve your tax issues and prevent this issue from happening again.