Every morning you wake up and start your day wondering how you are going to make it in your small business. Times are tough. People owe you money but they can’t pay you. You watch nervously as your coffers are steadily depleted trying to keep your lights on and your doors open. You don’t see where you can cut back any more on your expenses and, in your mind, it would be difficult to let employees go. Soon you quit making your monthly payments of withholding taxes to the IRS. You just can’t pay them and keep paying the bills to keep your business open. Who can blame you? You are in survival mode. You know that the IRS is going to come after their money one day. It is always in the back of your mind. But, you don’t know what else you can do. You have nowhere to turn. You are still filing your quarterly returns, but they show that you owe the IRS money.
Pretty soon you get that first notice from the IRS. They want the money that you owe them. You still don’t know what to do so you do what many people afraid of the IRS do. You ignore the problem somehow hoping that as time passes it will go away. You still can’t get the problem out of your head. It is there like a ghost, just lingering in a threatening, sickening manner. You can’t sleep. You just try to keep on doing business in the normal way- just trying to survive.
In the meantime the IRS has levied penalties on your business for not paying the withholding taxes to them. They are also assessing interest on the taxes and the interest is compounding daily. Wow! Look at those numbers climb. Not only that, the IRS is cascading the penalties. If you missed paying taxes on an old quarter, the IRS is applying any new payments that you may make to the old quarter thus making you delinquent in the newer quarters that you are actually paying.
One day, out of the blue, an IRS Revenue Officer (RO) shows up at your business asking to talk to you. If you aren’t there, he or she may ask your employees questions. The RO leaves his card and asks that you call him. You make the mistake of doing so because you think that you have no other choice. Within the first few moments of the conversation you have said things that, unbeknownst to you, will make it difficult for you in dealing with the tax debt. What do you do now? How are you going to get out of this mess and keep your business?
The IRS doesn’t look kindly on business people who don’t pay their Form 941 employment taxes. They don’t care if they close your business or cause you difficulty. They want the money, period. In the eyes of the IRS, you have committed a theft. The money that you withheld under trust from your employees’ checks that was supposed to be paid on their behalf for their portion of the taxes was used by you to run your business. It wasn’t your money to use. For this reason and for the reason that failure to pay withholding taxes usually continues piling up a big debt, the IRS is extremely aggressive in pursuing the situation. They want to stop the bleeding and they want to collect their money.
Well, don’t despair. There is always a solution to every tax problem. You just don’t know enough to know how to deal with it in such a way that will keep your business open and allow you to breathe.
Believe me. You do not want to handle this problem by yourself. In most cases, if you do, you will be at great risk of losing your business. You will also put yourself in financial jeopardy and, in some cases, you may even open yourself up to criminal charges for tax evasion.
Rule number one is DO NOT TALK TO THE IRS! As soon as you know that you are going to have a withholding tax problem seek out the help of a qualified tax attorney. Yes, you can run to your accountant or to an enrolled agent, but they aren’t in the best position to help you. There may be many laws that are applicable to your situation including state property and corporate laws that are the domain of tax attorneys alone. Also, there may come a day when you find yourself having to go to U.S. Tax Court, a Federal District Court or the U.S. Court of Claims. Although there are a few people, other than attorneys, who are allowed to practice before the U.S. Tax Court, only an experienced attorney is well equipped to do so. An attorney can also foresee issues that may crop up in the future and thus invoke strategies that may have to be used down the road in the various courts. An attorney can tailor your representation to present any possible future court case in the best light. However, a competent tax attorney will be able to keep you out of court in most cases. He or she can also keep you out of criminal trouble if it’s not already too late.
The next thing that you have to do is paramount. You have to start keeping current in paying your monthly payroll tax deposits. If you want to keep your business, you have to find a way to keep current. If you don’t, you will remain a non-compliant taxpayer and the IRS will refuse to work with you or your attorney in fashioning a remedy for your tax debt. An attorney can help you figure out a way to keep current and still keep your business viable. Normally, the IRS wants to see you be current for a period of at least six months before they will even talk about a remedy. Frankly, if you don’t start keeping current with your tax deposits, you are in danger of the IRS closing your business. But, even if you just can’t keep current there still may be some legal maneuvers that an attorney can invoke to keep you around a little longer.
The next thing that you have to do is to get your books in good shape. Make sure that you have entered all of your income and all of your expenses so that your books are current.
Don’t play games with your books. Be honest in everything that you do. An attorney can deal with whatever facts are presented to him and still strategize a way out of your problems. That doesn’t mean that it will be easy and it doesn’t mean that it will be fast. Tax problem resolution is a process, not a quick fix. Also, there are no guarantees when dealing with the IRS. You may even have to try a number of remedies before you find one that actually gives you some relief. However, with the right representation and a little patience, a solution to your situation can be found and implemented.
Don’t despair, there is help for you just around the corner. However, you must act and act now. The longer that you wait to deal with your tax problem, the more difficult it becomes. Obtain the right professional help. The sooner you do, the sooner you will be able to get back to living a normal, productive life.