What Happens When Your Business Owes Back Taxes?
If you haven't filed your business tax return or paid your taxes by the deadline, then you will have to arrange some way to repay the debt to the Internal Revenue Service (IRS). Back taxes can have serious repercussions if they are not dealt with, particularly for small businesses.
Unfiled Tax Forms
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The IRS are on the ball, and if you haven't filed your tax return, then you will receive a letter of notice that your returns are past due. Although it may be tempting to brush the letter aside, this is a bad idea. The debt will spiral into a much bigger problem as it starts to accumulate interest and penalties. If you genuinely forgot to file, apply for an extension and file the return as soon as possible. An extension won't reduce the amount you owe, but it gives more time to get everything together which could reduce additional penalties.
Communication Is Key
The most important thing you can do to avoid enforced collection is to get into an agreement with the IRS. The IRS's goal is not to make things difficult for you, but to get their money back, and businesses who communicate effectively with the IRS are generally in a much better position. If you fail to make an arrangement with the IRS, they will file a lien which can harm the business's credit rating. They can also levy your bank accounts, income sources, and capital assets including property.
The IRS will negotiate with businesses who come to them in good faith and want to settle unpaid taxes. This is definitely the first and best step to prevent the freezing of accounts and seizure of assets. For businesses who are experiencing financial hardship, the IRS provides special options that offer deferred payment and settlement.
Incorporating a business as an independent entity serves as a barrier between your personal life and a company's assets and liabilities. Although anyone can incorporate a business despite any outstanding debts or bad credit history, you can't move personal assets into a corporation to prevent paying a federal tax debt. Attempting to secrete capital assets in a corporation to dodge taxes is a criminal offense. If you have set up an agreement with the IRS to repay taxes, then there will be no problems incorporating and capitalizing a business — as long as you communicate and make payments on time.
Increasing Audit Potential
The number of IRS tax audits is at an all-time low, with only one in 160 personal tax return audited last year. Although it's not guaranteed to happen, owing back taxes to the IRS does increase the potential for being flagged up for future audits as they monitor your records.
There's only one solution when your business owes taxes, and that's to pay it back. Whether you are in a position to do this or not, there are options available. Review your options, but remember to seek advice from a tax professional if you're struggling, as they will help you find the best ways to go forward.
Is it conceivable to consult with the IRS and have fines, punishments, or a part of the assessments due killed?
An offer in trade-off is the best way to decrease the expense owed. Notwithstanding, there are a few different ways a business might most likely decrease or take out punishments. It relies upon the certainties of the circumstance. For example, if a business neglected to document its government form on time and is evaluated a punishment, it can call the IRS and have this promptly subsided if this is the main occasion it has neglected to record an assessment form on time. There may likewise be other uncontrollable issues at hand that made a business not follow the assessment law, for example, a fire or flood. In this circumstance, the business can document a reduction demand to decrease or wipe out the punishments.
Can entrepreneurs amend the circumstance all alone, or is it important to employ an expert to do it for them?
Entrepreneurs might almost certainly resolve the issue themselves in the event that it includes little issues, for example, inability to document one return or inability to pay time of duties. For bigger issues and those requiring accommodation of a fiscal summary, it's insightful to procure a certified expense proficient.
Streamlining your financial matters while dealing with taxes can benefit you in the long-run. Individuals, as well as businesses, can use strategic tax planning to help reduce their tax bill. Planning everything well before the year ends gives you ample time; letting tax matters pile up will not only cause stress.
In the field of finance, accuracy, reliability and time management is given so much importance. That’s why those people who work in this field are required to be responsible, accurate and attentive to the smallest detail. This is the same when it goes to being a financial auditor.
There are a large number of organizations who are taking the advantage of online accounting services. Due to the expanding businesses, many companies are outsourcing their accounting work to the other companies which are helpful in maximizing the returns on the core proficiencies.
Heavy Vehicle Use Tax also referred as HVUT is the fee paid annually.