While taxes for 2011 are due in April, it is important to take care of any IRS notices and bills from past years that were not paid when due, called back taxes. Here are some frequently asked questions about back taxes in relation to business tax preparation.
What back tax issues are commonly encountered by small businesses?
· Due to the complexity of tax law, many small business owners do not know how to use available deductions to reduce their lax liability and therefore end up with tax balances that are more than the business can afford to pay.
· With the current state of the economy, many small businesses have cash flow problems. When this is the case, they may use available cash to fund operations rather than making tax payments.
What types of tax payments are small businesses responsible for?
· Small businesses are responsible for paying sales taxes (often to multiple states), payroll taxes, and quarterly tax payments.
What are the consequences when small businesses do not make their tax payments on time?
· The IRS has the power to impose harsh penalties when small businesses fail to meet their tax deadlines. The reason for the delinquency is usually not taken into consideration.
· One of the harshest penalties is imposed when a small business fails to meet its payroll tax deadlines. The penalty is called the Trust Fund Recovery Penalty and is equal to 100 percent of the payroll tax balance. This penalty does not take into account the reason for the delinquency and can assign blame to anyone who was, in any way, responsible for the payroll tax debt.
What solutions are available to small businesses with back tax issues?
· The best way for a small business to deal with a back tax issue is to face it head on rather than to wait for the liability to increase due to the compounding of interest and penalties.
· Many states offer voluntary reporting programs and, while no such program is currently offered by the IRS, they due offer numerous tax debt settlement options.
· While small business owners may rationalize that they will clear up their tax debt issues down the road when business is more profitable, this is usually not a wise decision. The IRS is more likely to approve a tax settlement agreement when business income and profits are low, not to mention that the legal and financial consequences of not addressing a back tax issue can be severe.
· Due to the complexity of tax law, especially as it applies to small businesses, the best approach to resolving back tax issues is often to enlist the help of a qualified tax professional.
If you are a small business with unresolved tax debt, our experienced professionals can help you resolve your back tax issues and business tax preparation. For more information about our business tax relief services, visit us today at BusinessTaxPreparation.com. Contact us by phone at (866) 676-9417 or by email at firstname.lastname@example.org to receive a free, no obligation consultation.