Monthly Archives: October 2019

Getting Out In Front of Your IRS Liabilities

No one likes to owe anyone anything. Business owners sometimes owe debt to banks, which can eat into revenue and impact credit ratings, but that can easily be solved with factoring services. However, when a business has a liability owed to the IRS, the repercussions can be more severe, which is why it is important to get out in front of IRS liabilities.

IRS Liabilities

At the core, a business gains IRS liabilities when taxes aren’t paid. These taxes could range from filing yearly taxes for the business owner or company to the quarterly 941 taxes which take into account unemployment taxes and more. The first step is to send a notification to the business of liabilities. The second step is to move the liabilities to IRS collections, which can result in tax liens against the business, garnishment of revenue, extra fees, and more.

The First Step Is Recognizing that Liabilities Exist

Ignoring notices from the IRS will not make the problem go away – it will only make things worse. When most businesses file their quarterly taxes, the amount owed becomes very apparent. However, even if the liability cannot be paid in one lump sum due to revenue constraints, there are still options that will prevent the situation from escalating. Requesting an extension can give business owners added time to pay off liabilities. Additionally, business owners can file for a payment plan, which can spread out the amount owed over more manageable installments. The IRS doesn’t forget when a business owes a liability, and inaction leads to severe repercussions. The best course of action is to work with the IRS to create a resolution that satisfies their need for tax revenue without placing a severe strain on business finances.

Preventive Steps for Businesses

IRS liabilities do not appear out of nowhere. Working with a CPA or professional business tax service on a regular basis can give you a heads up about upcoming liabilities so you can set aside the capital necessary to pay them. Getting out in front of your IRS liabilities can remove a lot of stress and allow you to focus on building and growing your business successfully so that when liabilities arise, they can just be folded into yearly or quarterly operational costs.

Small Business Owners: Maintaining Your Good Standing with the IRS

A little while ago, we discussed the importance of getting a Certificate of Good Standing for your business, the process involved, and the advantages. Going beyond that, it is important for businesses to remain in good standing with the IRS, as well, in order to avoid fines, fees, liens, or worse.

Good Standing with the IRS Means Being Pro-Active

A long time ago, staying in good standing with the IRS was a simple as paying your taxes. While paying your business taxes is extremely important, remaining in good standing takes a bit more these days. We now live in an economy and political climate where we do things electronically, and tax laws are subject to change at a faster pace than ever before. Remaining in good standing means taking a pro-active role with finances. For small business owners who are keeping their accounting in-house, this means watching schedules to file business taxes, quarterly 941 forms, and more. Missing any of these can result in a liability and even a garnishment of revenue.

Staying in Touch with Your CPA or Tax Professional

For business owners who use CPAs or tax professionals, you will also need to stay on top of things. Yes, CPAs and tax professionals know what to do with figuring out your business taxes and what you owe to the IRS, but ultimately they are not responsible for getting the ball rolling. Those professionals rely on business owners to get them the reports and numbers they need in order to prepare taxes, so you need to watch your calendar as closely as they do. Work with your CPA or tax professional to have meetings or phone calls regularly. This should be happening anyway to stay on top of accounting and projections, but taxes are important, and should be a two-way street. Set reminders at the end of each quarter so you can file your 941 forms. Remember to get a jump start on business taxes so you can get your deductions filed early. Talk with your CPA or tax professional about new deductions or changes to business tax law. By doing these things, you not only create a stronger relationship and show your CPA and tax professional that you have a vested interest in what you owe, but you will also stay in good standing with the IRS.

Business Liabilities and Installment Plans: Protecting Your Cash Flow

If you own a business, you know how important cash flow is for thriving a growing. While maintaining a strong cash flow is essential to success, ensuring your company has no business liabilities with the IRS is equally important. Outstanding tax liabilities can lead to collections, which can place a severe strain on cash flow with very few options, and as we’ll see, even factoring won’t be able to solve IRS liability problems.

Business Liabilities and the IRS

IRS business liabilities take many forms. Some businesses miss the window to file their 941 forms quarterly, only to find out that they owe the IRS money based on their earnings and the size of their workforce. Another reason could be not paying unemployment taxes, or income taxes – either for the business or personal income tax filings as a business owner. All of these things can send up red flags with the IRS, and they can take measures to ensure they get the payments they are due.

IRS Collections

If liabilities are left unpaid, the IRS will typically issue a notice of payment. If the notice is ignored or lost, the outstanding liabilities are moved to the Collections Division of the IRS. Within the Collections Division, most business liabilities are handled by Revenue Officers, who will issue a tax lien against the business, which comes with a certain window in which business owners can make payments or make an appeal. If the lien is not heeded, the IRS can levy a forced collection, which could result in business owners having to divest from their operations. A lien can place a heavy strain on cash flow.

Factoring and Business Liabilities

In many cases, if the IRS has a lien against a business, using factoring to build up capital from receivable is not possible. A factor places a layer in between the business and the IRS, which is why factors will refuse to do business with entrepreneurs who have liens levied against them. Before using factoring services to boost cash flow, business owners must be transparent and let factors know about any liabilities involving the IRS.

At New Century Financial, we work with a wide variety of businesses to provide factoring services so they can accumulate the capital needed to stay in good standing with the IRS and avoid tax liens. Contact our offices today and stay ahead of business liabilities with New Century Financial’s factoring services.

Is Your CPA Filling Your 941 Payments on the Right Schedule?

The IRS requires businesses of all sizes to make 941 payments according to a regular schedule. 941 payments are necessary for any business that has listed employees, including the owner, so that the various employment taxes can be accounted for without repercussions. Most 941 payments include income tax withholdings, social security, and Medicare/FICA. Businesses must account for these payments for anyone on the payroll who is not a contractor or unpaid intern.

Breaking Down 941 Payments

The 941 payments form can be broken down into six basic parts for employers. The first part is relatively simple, and asks for the employer’s identification information and which quarter the form is being filed for. The second section is the most essential, because employers need to list the number of employees, the amount they earn, and the taxes owed. The numbers listed in this section will help determine if your business owes taxes or if you have overpaid, which can be applied to the next quarter. The third section lists a tax deposit schedule, so employers do not have to make a one lump payment to the IRS that can place a severe strain on finances. The fourth part is rather simple, because it just asks if you’ve closed your business or stopped paying wages to your employees. Part five gives you the option of putting the IRS in contact with a CPA, if you have a professional accountant handle your 941 payments. The last part is the easiest, just because it’s the line for the signature.

941 Payment Schedules

Filing 941 payments is fairly easy, because the schedule goes by quarters. Business owners must adhere to the following schedule, or else file for extensions:

  • Quarter 1: January to March

  • Quarter 2: April to June

  • Quarter 3: July to September

  • Quarter 4: October to December

Follow Up with Your Accountant

Whether you are taking care of the accounting side for your business, or you use a CPA, 941 forms must be filed and paid every quarter to avoid fines and fees. However, some 941 payments can easily fall by the wayside, if businesses aren’t careful. Make sure to meet with your accountant every quarter to make sure your business is on track with your 941 payments.