How To Face A Small Business Tax Lien

 

Do you own a small business? Then you pay taxes, just like every other business owner. What if you fail to pay all your taxes to the local, state, or federal government? What happens then? You may have to deal with a tax lien filed against you. Any of these government entities can come up with this legal claim against your properties, including but not limited to equipment, financial accounts, or real estate. The lien lets the government seize one or more properties to settle your debt.

You will get a Notice & Demand for Payment of all unpaid taxes before a lien is filed. After that, you get ten days in which you have to pay the IRS or the local or state government in full. Failing to comply will result in a lien being filed. One way to avoid encountering such a situation in the first place is to leverage small business accounting services.

Effect on personal accounts

Whether the lien will affect your personal account depends on the type of business you run. For instance, limited liability companies and incorporated businesses have liens filed only against their organizational properties. Conversely, the lien can cross the borders of a business property and trespass the boundaries of a personal property if filed against a sole proprietor. This happens when the business property doesn’t satisfy the lien.

 

The outcome of a lien

Rest assured, you won’t start losing your assets immediately after filing a lien, but it’s a publicly disclosed notice that the tax authority can claim your property. It also means the tax body can initiate the seizure if you don’t pay on time.

Apart from your property being taken, the lien may put your company at risk of falling behind competitors. A tax lien also makes it almost impossible for business owners to avail of business loans as it affects your organizational credit rating. Simultaneously, it will hurt your credit rating, tarnish the company's reputation, and make it difficult to sell a business asset to pay the debt. That’s why the providers of small business accountingservices always insist clients on paying their taxes on time.

Termination of a tax lien

The safest option is to settle the tax debt as quickly as possible. Do it the moment the IRS or other government entities notify you. In doing so, you stop the lien from being filed. Then again, it may not be possible for you to pay in full. Contact the government agency to frame a new payment plan when that happens. This may also help you avoid the lien.

Withdrawal: In certain situations, the withdrawal rule can remove the IRS tax lien from your business if,

 

·      You create an installment payment plan that won’t take more than sixty months to pay in full.

·        You owe no more than $25,000.

·        You make three timely payments consecutively.

·        You weren’t a defaulter on a previous tax payment plan.

 

2. Subordination: While subordination doesn’t terminate the lien, it will allow other creditors to enter the scene and help you with your payments. Subordination lets you secure business loans or rearrange debt for more money flow

DiDescharge: The property discharging process removes the lien from one of your properties. As a result, you can sell it without the lien piggybacking it. This method lets you raise enough money to pay your business taxes. However, the rest of your organizational properties will remain under lien. You must qualify for the discharge process and need enough property to satisfy the amount owed.

 

Help is available

Yes, seek help from expert accountants offering small business accounting services whenever needed. Running a small business is difficult, but professional support can get you through the toughest times.