Most small business owners don’t need to be reminded of how important it is to keep their company in good standing with the Internal Revenue Service (IRS). Paying your business income taxes on time should be the top priority item in your annual budget.
However, sometimes the unexpected happens and you fall behind. When business slumps, you may choose to pay your vendors instead of your taxes. As a result, many small businesses find themselves owing the IRS money at the end of the fiscal year.
While it’s understandable that a small business owner may struggle to raise sufficient tax capital, Summit Financial Resources believes that failing to pay the IRS should not an option.
Plan to Pay Down Your Debt
Business owners who don’t pay their taxes on time may be able to resolve the problem themselves, particularly if the issue is failure to file a return or to pay a year of taxes. If you can’t satisfy your tax burden, the IRS offers installment programs that allow you to set up monthly payment plans to pay down the debt. The IRS is a fairly reasonable creditor, and most agents are more than willing to work with you to find the right plan for your circumstances.
Small business owners who have working capital loans can use these funds to pay business income taxes. Summit Financial Resources offers flexible working capital financing that our clients use as they see fit, whether that means purchasing inventory or covering delinquent taxes.
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Tax Liens are Bad for Business
Failing to work with the IRS can result in a levy and lien on your business assets. A levy means the IRS seizes financial assets, such as bank accounts or payments from customers. A tax lien is a lien imposed by law upon your business assets that secures the payment of past due taxes, and through foreclosure, the government can seize and sell your business property in order to satisfy your tax debts.
The type and amount of business property that can be seized is far ranging and includes equipment, buildings, and intellectual property. By issuing a tax lien, the government is securing the repayment of the tax debt, and the government’s lien may take priority over the liens of other creditors and potential lenders.
Needless to say, a lien can be extremely bad for business. Here are several key reasons why:
- It damages your company’s business credit. This affects more than your credit score; it affects your credibility with creditors, which could lead to cash flow issues.
- It can affect your reputation with customers. They might feel uneasy dealing with a business that can’t pay its taxes or wonder if you’ll be able to stay in business.
- Selling anything with a tax lien on it becomes very difficult. You’ll face restrictions on attempts to sell or transfer the business itself or business assets like real estate, equipment, and inventory.
- Most business lenders will refuse to extend you credit until the lien is resolved. They know that their right to recover potential losses if you don’t make your payments takes a back seat to the government’s rights.
How Summit Can Help
Many prospective clients are embarrassed to tell us about their tax debt, and we discover it too late to get the financing in place to cover it. While it is far better to come to us for help before you are hit with a tax lien, we are often able to help you move forward on the road to a resolution.
Summit Financial Resources will work with prospective borrowers who have tax liens, provided you are on a repayment plan. This is the first good-faith step toward getting your lien resolved. If you don’t have a payment plan, we can work with the IRS to establish a repayment agreement on your behalf, and you’ll benefit from having the weight of a lender behind you.
Once your plan is approved, make your payments consistently and lower your lien amount as much as you can. The goal is to get your tax debt resolved as quickly as possible.
When you need to pay business income taxes and lack sufficient working capital, don’t wait for the IRS to come knocking. Summit Financial Resources offers a variety of fast and flexible financing options to help you get your business back on track.
Working Capital financing is a few clicks away.
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Summit Financial Resources specializes in working capital financing for small to medium-sized businesses that need increased cash flow. We provide working capital financing through invoice factoring, asset-based lending, inventory lending, and equipment financing.