Closing Your Business? You Need to Be Careful to Avoid Issues with the IRSOffshore Account Update
Posted on August 12, 2022 | Share
Between the lingering economic impacts of the COVID-19 pandemic and the unprecedented inflation we have experienced in 2022, many businesses in Boston are being forced to shut their doors for good. When closing up shop, business owners need to take several steps, and they need to be careful to avoid problems with the Internal Revenue Service (IRS).
The IRS recently published a Tax Tip discussing what business owners need to do when closing their doors for good. The IRS’ Tax Tip outlines several of the steps business owners need to take when shutting down, including:
- Filing a final tax return
- Paying their final income tax
- Remitting final employment taxes
- Reporting payments to independent contractors
- Canceling their employer identification number (EIN)
- Closing their IRS business account
- Keeping all business records in case they are needed for an IRS business tax audit or investigation
Of course, many of these steps are easier said than done. So, what happens if you close your business and you cannot afford to pay the IRS what you owe?
Avoiding and Resolving Tax Issues When Closing a Business
In many cases, when businesses shut down, they have outstanding liabilities that they cannot afford to pay. Oftentimes, these liabilities include income and employment taxes owed to the IRS. Falling behind on federal tax liability is a serious matter that can lead to substantial penalties—and that can even lead to criminal tax fraud charges in some cases.
If you are closing your business and you do not have the funds needed to satisfy your business’s federal income or employment tax liability, what should you do? The answer to this question depends on the circumstances at hand. For example, some of the factors that will impact your options include:
- Whether your business is behind on its income tax liability or simply cannot afford its final tax bill;
- Whether your business has used employees’ withheld employment tax contributions for non-tax purposes;
- Whether you have knowingly underpaid your business’s income or employment tax liability;
- Whether you have previously filed for tax relief on behalf of your business; and,
- Whether the IRS is currently examining your business’s tax records or you still have time to make a “voluntary” disclosure.
Depending on the circumstances at hand, submitting an offer in compromise, negotiating a settlement agreement and submitting a voluntary disclosure are all potential options. However, these are also very different options with very different eligibility criteria and consequences. To determine how you can best protect yourself after closing your business, you should discuss your options with an experienced tax attorney.
Get Business Tax Help in Boston from Tax Attorney Kevin E. Thorn, Managing Partner of Thorn Law Group
Do you have questions or concerns about your business-related tax liability? If so, we can help you make the right decisions with your long-term legal and financial interests in mind. To schedule a confidential consultation with tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 617-692-2989, email firstname.lastname@example.org or contact us online today.