Can the IRS Shut Down My Business?

Business Tax Issues

Tax Relief Options Pertaining to Business Taxes.

Benefits of Getting Expert Help for Business Taxes
  • Senior tax debt negotiator will speak to the IRS on your behalf
  • Experts understand all complexities of business taxes
  • Avoid penalties & keep your business

How Much Tax Debt Do You Owe?

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Shannon McKee
Shannon McKee
January 11, 2019

  • Falling behind on your business taxes can result in the IRS taking steps against your business to recoup the money you owe.
  • The IRS has to follow the rules and protocols in place that can protect your business from being shut down outright.
  • Working with the IRS to solve your business tax debt is in your company’s best interests in preventing the forfeiture of your business assets or having to¬†shutter your business.

As a business owner, you’ve put significant resources into your business with long hours and personal sacrifices. The question of whether the IRS can shut down your business can be one that may make you worry that all you’ve worked for could come to an end. Some circumstances can result in the IRS shutting down your business, but not every instance of business tax debt will have that outcome. In fact, it’s one of the less likely consequences to consider. However, your business tax debt shouldn’t be something to ignore either. Proactivity can often make a difference in how the IRS could handle your debt.

Noncompliance Issues and the IRS

A few situations can prompt the IRS to take a more in-depth look into your business and its tax debt. Some issues to avoid include the following:

  • Not filing your tax returns or filing your returns late
  • Not paying your taxes on time
  • Having a pattern of owing taxes every year but failing to file them in a timely manner

In fact, some tax debt, such as payroll tax debt, can be more severe than simply owing back taxes. Payroll taxes are something that you handle on behalf of your employee. Failure to pay taxes to the U.S. Treasury can be treated as theft as the IRS considers that your business is the delivery agent of the money, not the owner of it. Serious ramifications can occur in these types of situations. Penalties and fees could be added to the amount you already owe. Failure to pay could also result in criminal charges and the potential for a prison sentence if you’re found guilty of willful failure to comply with federal employment tax laws.

Can the IRS Shut Down My Business?

Protection You Have Against Your Business Being Shut Down

Even in situations where you owe a business tax debt to the IRS, existing rules can prevent the IRS from shutting down your business. The rules that can help protect you and your business include the following:

  • The IRS is required to consider other means of collecting the tax debt before the agency take steps to seize your property. These other methods can consist of payment plans and an offer in compromise. An offer in compromise occurs when you and the IRS agree to how much of your tax debt you will pay. This particular rule is covered under Internal Revenue Code 6331(j).
  • The IRS is restricted from entering your business to seize your business assets unless the agency has your permission or a court-ordered warrant. Without either your permission or a warrant, the IRS would be violating the Fourth Amendment.
  • The IRS only seizes business assets that are greater than a certain protected threshold. Your first $4,560 of business assets are protected. Any assets that are greater than that amount may be subject to being seized by the IRS. In a small, simple office, it’s possible that you won’t have enough assets under Internal Revenue Code 6334.
  • Finally, the IRS can only take items from your business that have equity. For example, if you have a real estate loan on your business property that’s equal in value, no equity is in that loan. In other words, the IRS would not have access to recoverable funds to pay your tax debt. The IRS is not permitted to take anything that has no net recovery for them.

It takes time and effort for the IRS to go through the steps necessary to seize your business and business assets. This event is often an extreme measure and doesn’t happen all the time. Before the IRS follows through on these steps, you can work with the agency to protect your business as best as you can. Often, this protection requires gestures of good faith on your part for the debt owed to them.

Become Compliant and Avoid Pyramiding

The first step that you can take is to become compliant. You should file any business tax returns that you haven’t registered yet. You’ll also want to pay any taxes that have not been paid. Make sure you’re up-to-date on what you owe to the IRS. Once you’ve paid for your current overdue taxes, you’ll want to make sure that you continue to pay on time every year. A pattern of broken trust can be problematic for you and your business.

The IRS doesn’t look favorably at companies that pyramid their unpaid taxes. Pyramiding your taxes occurs when you fail to pay for every year you owe taxes. For the IRS, this poor faith action can put you in an unfavorable position with IRS representatives that work with you on your tax debt.

Follow Through on All Deadlines

The April 15 deadline is one that no American can forget. This day marks the deadline that tax returns and tax payments are due to the IRS. Deadlines are something that the IRS takes very seriously. If you’re working with a Revenue Officer or Automated Collection Service, you will receive deadlines that you must meet to stay compliant.

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For example, if you receive Form 9297 requesting your financial statement and unfiled returns to work on negotiating repayment terms, be sure to return the form before the deadline given to you. Lack of cooperation on your part could have an unpleasant outcome with the IRS not willing to settle or agree upon a payment plan. It could also end with your business or certain assets being seized.

Negotiate for a Case Resolution

Once you’ve gone through the previous steps, you can then work on negotiating your IRS case resolution. A resolution will mean that your case has been closed. Your resolution can come in a variety of forms, including options such as a payment plan or an offer in compromise.

Working with the IRS in good faith can go a long way toward protecting your business interests. Are you concerned about your tax debt or worried about your company? Solvable offers educational articles, reviews of businesses, and other resources through our partners to provide you with the information you need.

 

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