With the current state of the economy, many business owners are facing declining revenues and as a result are falling behind on withholding and other tax payments. If your business is dealing with tax debt, it is important to be proactive. Taxing authorities can file liens and levy bank accounts and receivables. Most companies cannot survive such aggressive collection action. First, it is important to obtain a tax transcript to understand the correct amount of tax debt owed by the company. Once you understand the extent of the tax problem, you will want to communicate with the taxing authorities to set up a monthly payment agreement or lump sum payment to settle the tax debt. You may also want to sell any unencumbered assets to satisfy the tax obligation. If you are unable to reach an agreement with the taxing authorities, you may want to file a Chapter 11 “reorganization” bankruptcy for your company. In Chapter 11, your company would have five (5) years to pay past-due taxes and could also restructure other non-tax debt. For the company to also maintain current and ongoing tax payments, you may have to downsize your company or make other necessary budget adjustments in order for your company to cash flow. It is also important to note that as an owner-officer of the company, you will have personal liability on certain taxes like withholding and sales taxes. Hence, it is critical that you be proactive and develop a strategy for dealing with tax debt as collection activity will also affect you personally as the business owner.
Jamie Harris is an associate attorney with DelCotto Law Group PLLC. Her practice of law focuses on helping business owners hurdle financial obstacles. Jamie is best known for her experience in filing Chapter 7, 11, 12, and 13 bankruptcies. In her Chapter 11 cases, Jamie has represented companies from many different industries including healthcare, nonprofit, trucking, construction, commercial real estate and telecommunications.