What to do if you can’t pay your business tax bill

Dustin Johnson
By Dustin Johnson

Owning a small business can be rewarding. But small business ownership may also bring some challenges with it, including cash-flow crunches. If you’ve fallen behind on your tax bills, or have one coming due that you don’t think you’ll be able to cover, you have options.

File on time

Not having enough cash on hand to pay your tax bill can be stressful. Being surprised by an unexpectedly large tax bill can feel overwhelming. The first thing to do is to make sure you stay on top of filing your returns on time. Don’t compound the issues by skipping deadlines just because you’re concerned you won’t have the money to pay the taxes due. 

| The first thing to do is to make sure you stay on top of filing your returns on time.

Pay what you can

If you’ll have at least some of the taxes owed by the filing date, sending a partial payment is better than sending no payment at all. It demonstrates your willingness to pay, and it keeps any potential interest and penalties from accruing on the portion that you paid. 

The bigger the portion you can pay at the time of filing, the better positioned you’ll be. Consider delaying capital investments or otherwise freeing up cash to send in as much as you can reasonably part with without causing disruption to your business. 

Explore payment plans and other options with the IRS 

The IRS and state tax authorities understand that businesses and individuals sometimes run into cash flow issues. They’ve created several options to help you meet your tax obligations. While not all of them apply to every taxpayer, it’s worth familiarizing yourself with the options: 

  • Request an extension - perhaps the best-known method of dealing with tax issues is to request an extension. But note this only buys you time to file your return, not pay your tax. At the time of filing the request for an extension, you’re expected to pay the estimated tax you owe.
  • Short-term payment plan - the IRS offers a plan that gives you up to 120 days. You can only use this option if the amount you owe is less than $100,000. That includes taxes, interest, and penalties.
  • Long-term payment plan - this plan will allow you to pay over a period of longer than 120 days, but can also be used if your overdue bill is $50,000 or less, including penalties and interest.
  • Offer in compromise - you can apply to have the amount of tax you owe reduced if you meet certain conditions. If you find yourself in a situation in which you can't pay all the taxes you owe and doing so would create a financial hardship, you may be able to file an Offer in Compromise

Make a plan to get back on track

Unpaid tax bills can be stressful, but with a bit of planning, you should be able to get back on track. Of course, the best way to stay on top of taxes is to make sure you never fall behind. That’s why ComplYant offers a full suite of options to keep you up-to-date on your filings so that you’re not faced with tax surprises.

Dustin Johnson
By Dustin Johnson
Dustin Johnson is a Senior Tax Research Specialist at ComplYant. Prior to joining ComplYant, he spent over eleven years performing tax research at the world’s largest tax preparation company. Dustin holds a Bachelor of Business Administration and a Juris Doctor. Outside of work, Dustin enjoys biking and spending time with his family.

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