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What Happens If Your Business Owes the IRS or New York State Money?


Working with the IRS or New York State When Your Business Owes Back Taxes

While everyone would like to receive a tax refund, this only happens in a perfect world. Unfortunately, small businesses frequently owe taxes at the end of the fiscal year, and no matter what the financial situation may be, failing to pay taxes due to either the IRS or the state of New York is not an option.

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What to Expect

Any time a company fails to pay taxes when they are due, some of the consequences they may suffer include the following:

* The IRS will send a notice to any taxpayer who fails to pay the taxes owed. It is not wise to toss these notices aside since it will only cause the taxing agency to levy additional fees and penalties against the business. They may assign an agent to handle the case if the taxpayer fails to respond in 30-60 days.

* Taxing agencies such as the IRS and New York State will impose fees and penalties on any business that fails to file taxes after the April 15th deadline. Fees can be anywhere between five percent and 25 percent of the total taxes due each month. Failure to pay within 60 days of the due date will result in even more substantial penalties.

* In addition to imposing fees and penalties, the IRS may also choose to seize the owner’s social security earnings.

* The final type of levy the IRS uses to collect from businesses that owe back taxes is seizure of the taxpayer’s property. Business owners who fail to file their taxes on time and pay in full run the risk of losing their cars, properties, and even the business equipment.

Taxpayer Options

When a business owner is unable to pay off what they owe the IRS it is important to become aware of the options that are available to resolve the debt. The first step is to contact the agent handling the case and attempt to work out a solution. In many cases the IRS will help the business owner develop a payment plan that will allow payment of the taxes the company owes.

There are several ways in which the IRS helps small business owners resolve their tax debt. Some of the options available include any number of the following choices:

* If a company is unable to file its taxes on time, the first step is to request an extension rather than allowing the taxes to go into default. While extensions do not eliminate fees and penalties, they do allow an additional 120 days for filing the return without negative consequences.

* Another option open to small business owners who are struggling to pay their taxes is an installment plan. Anyone owing less than $50,000 can simply ask for a 72-month agreement and be approved. While entering into an installment plan prevents the taxing agency from levying on the company’s property, there is often a very high interest rate attached to the plan.

* If a business has gone through a recent period of extremely low revenue, and the situation is serious enough, the IRS may choose to put the business into an uncollectible status. This doesn’t mean the penalties and interest will cease, but the IRS will be unable to suspend benefits or try to levy assets during the agreed upon time frame.

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* Bankruptcy is another option open to business owners who are unable to file and pay their taxes. It is likely to be the best option for those who have not filed for several years and whose debt does not qualify as uncollectible. Bankruptcy is only a temporary solution; it may be better to take out a loan or an installment plan.


Determining what works best for you is not always a simple solution. It’s usually best to talk to an expert trained in working and negotiating with the IRS and New York State. If you’d like to know more about how we can help you solve your tax problem, call us for a FREE Tax Help Consultation at (855)829-8477

We’re Your LOCAL Federal and State Tax Problem Solver

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