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By Albert Cooper

Running a business goes hand-in-hand with honoring your tax obligations. You need to not only know which taxes to pay and how much in taxes your business owes but also when to file your tax returns. As a small business owner, taxes could just be your least favorite topic, especially when you think of the enormous legal powers given to the IRS to collect tax debts.

What happens if you have an outstanding IRS balance and can’t clear it on time? Does it mean it’s the end of your business? It really doesn’t have to be. While the IRS has the power to seize all your assets without a court order or judgment, you can always work something out with the government entity to resolve your tax debt. It’s, however, important that you understand how to deal with the IRS when considering your repayment or settlement options. There are several ways you can find you can find tax relief help. With that in mind, here are five ways you can handle the IRS if your small business owes money:

Stay in contact with the IRS

Ignoring the fact that your business owes taxes isn’t the right thing to do. The IRS doesn’t ignore or forget tax debts. Time may be on your side, but it’s just a matter of time before the agency comes around looking. Even if you can’t pay your tax debt, stay in contact with the IRS. If possible, file your tax return on time or consider filing for an extension. Otherwise, you’ll have to deal with penalties and interest. In a worst-case scenario, you could lose your business.

It’s important that you cooperate with the IRS and provide them with any information they may ask for regarding your finances or assets. Don’t come up with a narrative that’s not true. Be truthful. However, keep in mind that you don’t have any legal obligation to do so unless they have formally served you with a summon.

Furthermore, address Penalties and interest. You’re not dealing with any other creditor. The penalties the IRS charges could easily outstrip your credit card interest rate. Ignoring the penalties and interest increases your tax debt making it more difficult to pay. Reach out to the IRS and see if they can grant you a full or partial abatement of your penalties. Make sure you address your penalties and interests before they accumulate further. You’re better off avoiding them in the first place.

Set up a payment plan with the IRS

Installment agreements allow taxpayers with large debts to pay off their tax bills in monthly installments. You can arrange a streamlined installment agreement with the IRS depending on the amount of debt you owe, your household income, and how soon you can pay the tax you owe and penalties. You can set up your payment plan by completing form 9465 or an online payment agreement. Setting up an installment agreement doesn’t stop the penalties and interest from accumulating. However, the monthly penalty on your unpaid IRS balance drops to 0.25 percent, until you clear the tax debt on schedule.

Request a temporary “uncollectible” status

If you’re in a hardship situation, request the IRS to temporarily place you on the “currently not collectible” status. You need to prove to the government entity that paying your balance could cause financial hardship. Taxpayers aren’t required to pay any fees or costs when applying for a hardship extension. There are no penalties but interest continues to accumulate. If the IRS approves your application, you’ll be left alone for the agreed period. But that doesn’t mean they’ve forgotten. Your business still owes the IRS.

Consider an offer-in-compromise

An offer in compromise allows a taxpayer to settle their IRS balance for less than what they owe. The formal process often involves filling out an IRS form, providing detailed information about your business’s financial situation, and requesting to settle your tax debt for less than the amount owed. Some of the factors the IRS will consider include your business expenses, income, asset equity, and ability to pay. The IRS will accept your offer-in-compromise only if they determine that they’re unlikely to collect the tax debt and penalties in the future. As such, the best course of action would be to accept less now.

Pursue bankruptcy protection

Bankruptcy can be a powerful tool if you’re in debt. Of course, the IRS won’t advise you to take that direction but pursuing bankruptcy protection can help you reduce or settle your tax debt. Even though filing for bankruptcy can be a long and complicated process, you might consider it as a last resort. Keep in mind that bankruptcy protection doesn’t cover corporate or business income tax at all. It can get you relief for some back taxes though.

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Albert Cooper is a professional blogger and SEO advisor. He writes articles to rank his client’s sites on Google. You can search his content from Google to using the “author Albert Cooper”. He is also a content advisor and writer of many blogs like Bkreaders.com, bittbox.com, historyandheadlines.com, Businessingmag.com, pe