If you don’t pay your taxes on time, you’ll owe back taxes and the penalties and fees that accompany them. While owing the IRS money isn’t a position taxpayers want to find themselves in, it’s far from a hopeless situation.
Many options are available to you, even if your business is tens of thousands of dollars in debt to the IRS. Do your research, examine all your options, and take action. The sooner you act, the sooner you’ll find yourself back on solid financial footing.
If you get a letter from the IRS, take action. It’s tempting to tuck it in your desk drawer and tell yourself you’ll deal with it later. However, after you’ve received a notice from the IRS, each day that passes without action on your part puts your company more at risk.
You may feel intimidated, but read the letter and respond immediately, even if you can’t afford to pay what you owe. Hiring an accountant or CPA to guide you may alleviate some of your stress and will help you get the best possible outcome.
Ignoring the IRS doesn’t make it go away. Dealing with the agency is the best course of action to take when you owe back taxes. In many cases, the IRS is happy to work with you as long as you’re making an effort to pay what you owe.
Request an Installment Agreement
If you’ve filed your return but can’t pay your taxes in full, apply for an installment agreement. This is an option for businesses that owe $25,000 or less in back taxes and can pay what they owe within 24 months.
Use the Online Payment Agreement application to make your request. You’ll know within seconds if you qualify. If approved, you can have your payments debited from your bank account so you don’t have to worry about late fees.
Apply for an Offer in Compromise
If you can’t pay your back taxes in 24 months or less, consider applying for an Offer in Compromise. This is an agreement that allows you to pay less than you owe. The IRS will consider an Offer in Compromise if the agency has no expectation of collecting the full amount you owe.
When determining if you qualify for an Offer in Compromise, the IRS will look at your expenses, income, and assets.
Request to Have Penalties and Fees Waived
If it’s the first time you’ve owed back taxes, call the IRS and ask to have all fees and penalties waived. If you haven’t established a pattern of non-payment, the IRS is often willing to waive fees if it means the agency will get the taxes it’s owed.
If you owe the IRS money, deal with it sooner rather than later. The interest and fees that accumulate on back taxes owed can snowball quickly, making a bad situation worse. Once you take action, you’ll probably find that you have more options than you thought you did. Consider hiring a professional to guide you through the process to help you achieve the best possible outcome for yourself and your business.