Business Tax Debt

When a business owes a tax debt to the IRS it can be devastating to that business; and an IRS tax debt can even cause a business to shut down! Business debts grow rapidly if not taken care of immediately. Many business tax debts will break the $100,000 mark within a year of the debt being assessed.

The majority of business tax debts occur because of filing errors on 941 payroll taxes or 1099 annual earnings forms. That’s why it is imperative that a business keeps accurate records. While accountants and book keepers can perform the day to day functions, a business may want to consider hiring a CPA or tax attorney when tax time comes around.

Small businesses are a favorite target of IRS collectors. Because a business tax debt can grow from a small filing mistake, the IRS collections branch won’t waste any time making sure that business can’t get out of their tax debt situation. Then the collectors can move in and seize business assets.

941 Payroll Tax

If you are or have been a small business owner you know that you have to file your 941 payroll tax withholding every quarter (3 months). This amount, which is the taxes taken out of your employees’ paychecks, must be paid to the IRS every 3 months. If you miss a payment that is where the problem starts; the IRS will immediately start charging you late fees and penalties from day one. But that’s just the beginning of the nightmare with the IRS if you don’t stay on top of your quarterly payroll filing.

In addition to filing your 941 payroll taxes on time you need to make sure they’re correct. Make sure all your employees are getting the correct amounts taken out of their paychecks, and check your books before you send in the payment to the IRS. If your numbers are wrong your IRS payroll tax debt will balloon out of control.

Tax Lien

Federal tax liens can cripple an individual or a business that has tax debt. A tax lien is imposed on a credit report and makes it impossible to get a loan or refinance anything. The worst part about a federal tax lien is that it doesn’t get lifted if the debtor goes into a payment plan with the IRS, or enters into some other debt settlement. A tax lien only comes off a debtor’s credit when the debt is paid in full.

A tax lien can seriously hurt an individual tax payer, but it could spell the end for a business. If a tax lien is assessed against a business there’s no chance of getting any kind of business loan to buy new equipment or make improvements to that business.

Wage Garnishment

A wage garnishment is the IRS’s way of getting the money for a tax debt out of a person’s paycheck or other income earnings. The most common form of wage garnishment is of course the paycheck withholding.

But for businesses or independent contractors a wage garnishment can become much more sinister. In those cases the government demands payment for the tax debt from the business or contractor’s customers, forcing them to pay the IRS before they pay the business. Not only does this affect the revenue of the entire business from buying supplies and equipment, to paying its employees; but it can also damage a business’s reputation which can cause further losses.