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.
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.