Being buried under a mountain of unpaid tax debt can be stressful and frightening for any small business owner. Instead of buckling under the strain or sticking your head in the sand, consider dealing with your unpaid taxes now. There are several options for resolving unpaid tax debt, which include several IRS repayment programs. Check out some potential solutions below.
Your bank or credit union may offer a debt consolidation loan at a low or decent fixed rate that will enable you to pay off your tax liability for a fixed loan term and interest rate. This could potentially save you lots of money on accrued IRS penalties and interest that quickly pile up on any unpaid tax balance. If your credit is good or you have collateral, you may qualify for the best rate your financial institution has to offer. There are also several online lenders who may have more flexible loan approval guidelines or lower rates, depending again on your credit score and other loan application factors.
IRS Deadline Extension
In simple cases in which a short-term circumstance prevents a taxpayer from paying taxes owed, the IRS may extend the payment deadline. These are typically short-term agreements. You can find out more about special circumstances surrounding some specific kinds of extensions here.
IRS Installment Payment Agreement
The IRS offers installment payment agreements for businesses and individuals who cannot pay their taxes in full at the time a tax return is filed. The IRS has short-term agreements (120 days or less) or long-term agreements. There is no set-up fee for a short-term agreement. However, a set-up fee may be charged for a long-term agreement. Penalties and interest will accrue on the unpaid tax balance over the duration of the installment agreement. You’ll want to contact the IRS to discuss payment amounts and terms, depending on your outstanding tax balance. You can apply online or over the phone.
Offer in Compromise
An Offer in Compromise is basically a debt settlement agreement with the IRS which allows taxpayers to settle their unpaid tax debt for less than the full amount owed. If the IRS determines a taxpayer can pay the debt in full or via an installment payment agreement, the IRS will not approve an Offer in Compromise. The IRS considers several factors when deciding, including the taxpayer’s income and assets. You can use the IRS Offer in Compromise pre-qualifier to see if you might qualify for this repayment option.
In extreme cases of overwhelming debt, some businesses and individuals may consider filing a Chapter 7 or Chapter 13 bankruptcy. In all cases, bankruptcy should be considered as a last resort, as filing has long-term negative impacts on your credit. And typically, tax debts cannot be discharged under a bankruptcy. So, you will carry tax debt with you during a Chapter 7 bankruptcy and under Chapter 13, you will repay the tax debt under the terms of your court-approved repayment plan. This is not legal advice, seek a bankruptcy attorney with specific questions about tax debt and/or filing.
Resolve your tax problems by visiting Rush Tax Resolution.
For more tips and inspiration for small business owners,
visit CBS Small Business Pulse Los Angeles.