You have worked hard to build your business. If your business owes money to the IRS, you may have felt helpless as you watched the debt grow. You don't want to lose everything you worked for over taxes. The good news is, there are steps you can take. Here are five things you can do if your business owes money to the IRS:
1. Don't panic. Your situation may seem scary, but unless you are already far down the path of collection and the IRS is knocking at your door, you probably have a little time. The IRS moves slowly, which is good news for you. You have time to meet with tax professionals to review your options and make a plan for repayment. Don't relax too much, though. The penalties and interest add up fast.
2. Communication is key. The sooner you reach out to the IRS, the safer you will be. Although the IRS moves slowly, its power is vast. It can collect anything you own for your tax debt. It can even shut down your business and seize your assets. Thankfully, they rarely go quite that far. Provide the information they are requesting, but be careful. You don't have to disclose everything about your finances.
3. Working out a plan. The IRS routinely works out payment plans with people, and sometimes negotiates discounts. You may find a solution that works for you. The down side is that the interest still accumulates. In certain cases, the IRS will grant an "Offer in Compromise," which is a lengthy process where the IRS accepts a very small percentage of what it is owed. They usually only grant these in cases where they don't believe they will collect more in the future.
4. Ask for "uncollectible" status. If you can convince the IRS that you really cannot pay the tax debt now, but may be able to pay down the road, they may place you on a temporary "uncollectible" status. They will stop collection efforts, but the interest still accumulates.
5. File for bankruptcy. Many people think of bankruptcy as a last resort, but it may be the right solution for you. It will not wipe away all of your tax debt, but if your business is in dire straits, bankruptcy may free up money tied to other debt so you can stay in business.
The sooner you find a solution to your tax debt problem, the better off you will be. Then you can focus on what you do best- building your business.