Debt: Most people have it, everyone fears it. Whether the debt is personal or business related, the threat of bankruptcy, foreclosure, tax liens and bank levies is enough to lose sleep over.
With such a turbulent economy, businesses of all sizes are fighting to keep the bills paid. Unfortunately, many small businesses are experiencing an added challenge; keeping up with tax payments. Unpaid taxes are one of the largest sources of debt among small businesses and the IRS does not take collecting their money lightly.
Tax Debt Solutions
Fortunately, the IRS does offer a few ways to resolve tax debts without taking extreme measures. The two main reasons for unpaid taxes is (1) the inability to pay and (2) doubts regarding tax liability.
Repayment Plans. The IRS offers two programs to help taxpayers repay their taxes in a way that is easier on their budgets. An installment plan allows for a tax debt (less than $25,000) to be repaid in installments over time, usually up to 24 months. However, many businesses may be granted the full 10 year statue of limitations period to repay the debts as long as they are making consistent payments to the IRS.
An offer in compromise is a debt settlement option allowed by the IRS, in which they may agree to accept less than the full amount of tax debt owed. Typically, these are reserved for those under significant financial troubles and the taxpayer must be able to (a) provide proof of financial hardship and (b) make an offer based on an amount that is equal to or higher than the reasonable amount that they could pay.
Liability Reviews. In some cases, there may be doubt as to the tax liability. If a person believes their calculated tax liabilities are incorrect, the IRS can allow for the tax liabilities to be reviewed for accuracy. The taxpayer must provide the necessary documentation to support the claim and contact the IRS to request the review. If there were any discrepancies the IRS may adjust the tax liability.