The Steps to Take if Your Business Can’t Pay Its Taxes

When it comes to business taxes, it doesn’t pay to mess around with what’s due to the IRS. They don’t have a sense of humor about getting payments in on time and can take steps against the business, including charging interest, adding penalties or even freezing accounts if it comes to it.

Tax season stress

In this article, we cover the steps to take when a business is struggling to pay its taxes.

1. Confirm the Due Dates for Federal Income Taxes

There’s a tax return date based on the type of business structure.

For federal taxes (state ones may be different), the tax return data for filing is also the payment date for the taxes too.

2. Understand What Can Be Charged When Failing to Pay on Time

The IRS is permitted to impose extra costs to the business taxpayer when federal taxes aren’t paid, either online or when the right amount isn’t received.

There might be penalties or interest charged to the business.

At the time of writing, the interest charged for business taxes that go unpaid is 6 percent annually. There’s also a penalty for late payment of half a percent each month from the deadline date.

In addition, when filing business taxes late, there’s a 5 percent penalty applied every month too.

3. Does Paying Less than 100% Make Sense or Is It Best to Wait?

It is permitted to pay 90% of the tax due to the business.

When paying 90 percent of what’s due, it’s often the case that penalties are avoidable with some negotiation. Essentially, by showing a reasonable attempt to pay the full amount, sometimes penalties are waived (interest is still chargeable though).

If paying almost the full amount isn’t possible, it’s best to make a payment from what the business has available. This shows as much goodwill as possible and not a complete refusal to file or file and not pay. Also, by filing on time and paying what the business can afford, it avoids the late filing expenses.

4. Know What Else Might Happen If a Business Doesn’t Pay Taxes?

How bad can things get when not paying business taxes to the IRS?

You might be asking can the IRS freeze bank accounts? Unfortunately, the answer is yes. However, it’s all a matter of degrees.

The most important thing is to work with a tax consultancy that has experience dealing with these types of issues. They can negotiate and reach an agreement with the IRS. Doing so can help to create a plan to resolve the situation and often reduces the total cost of being behind on business taxes too.

5. Other Steps to Take

It should go without saying that when the business has a problem with retaining enough monies to pay its taxes, then the owner should reevaluate the situation.

What’s the cause of the cash flow problems? Can they be resolved quickly?

Is the business using the most efficient marketing approach to lower the cost of customer acquisition?

Also, cut costs where possible to reduce the outflow of monies to find a surplus to set aside for back taxes. Ultimately, it’s up to the business owner to create a way to solve the problem before it becomes too severe.


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