A 2016 CNBC Small Business Survey showed that 22 percent of small businesses cannot work out the effective tax rate they should pay. It’s not hard to see why; corporate taxation is complicated at best, and many small business owners find themselves lagging behind on payments. To make things worse, these non-payments accrue interests and penalties that can quickly get out of hand. If your business owes the IRS back taxes, it may be necessary to get professional help with your tax debt. There are several options at your disposal, and tax debt professionals can determine how best to proceed given your personal and business circumstances. These are the four options to pursue:
1. Get an IRS Payment Plan
The IRS has provisions for businesses that need more time to settle their tax debts. However, it is important to note that effecting any payment plan doesn’t exempt you from any interest or penalties; they will accumulate for the outstanding amount. Tax debt advisors can help you create a regular repayment schedule while minimizing the impact of interests and penalties. With this option, note that any tax debt above $25,000 must be paid through automated withdrawals from a checking account. There are additional fees should you choose to pay using credit or debit cards, usually 2 percent of the installment amount or $2-$4.
2. Apply for Offers in Compromise
Offers in Compromise are open for those that cannot settle their tax liability without triggering serious financial distress for self and/or business. For this option, after you make an application, the IRS investigates your incomes, expenses, and net assets to determine your ability to pay. Should the IRS accept your offer, an initial payment of at least 20 percent of the amount you have offered becomes due. As a caution, note that your personal data can enter the public domain, e.g. name, city and state, outstanding amount, and terms of your offer. These may be entered into the IRS public inspection files. Over 50 percent of applications of Offers in Compromise are rejected, even when they show that they have lower income or higher expenses. It is recommended that you exhaust other available options before applying for the IRS offer in compromise.
3. Seek “Currently Not Collectible” Status
When you are unable to both pay your outstanding tax debts and essential living expenses, you can ask the IRS to place your account under “Currently Not Collectible” standing. When you apply for a delay in collection, you will often submit a Collection Information Statement form to verify that you have inadequate funds to settle your tax liability. In this form, you must give accurate information on your income and expenses. Even if you succeed, your “Currently Not Collectible” standing is temporary, and it does not wipe off your outstanding debt. The IRS may enter a tax lien against you even with this status. They will also review your account annually to check whether your financial status has changed. However, acquiring the “Currently Not Collectible” status can buy you some time to sort out your financial health.
4. Seek Help from Tax Relief Specialists
Regardless of the method you choose to settle your outstanding debt, getting the help of tax debt specialists or a tax relief company can ease the process of getting tax debt relief. These advisors can study the business’s and your expenses and recommend the best avenue to pursue from the above options. They can also help you to fill the right forms and avoid any errors that ruin your chance of getting a favorable outcome. Before working with any tax professional, ensure you understand how they will help and what they charge. Many taxpayers may not qualify for the tax relief programs advertised by these companies, but they find out this too late – after paying their hard-earned cash.
Having an outstanding tax debt can be a huge burden for individuals and small business owners. But with the proper assistance, it is possible to get your finances and taxes back in shape. Contact Tax Professionals at FinishLine Tax Solutions Today to find out if you qualify for IRS Tax Relief Program..