Remember Nortel? Surely somewhere in that back of your mind you remember this former cell phone giant. Well, just when we thought Nortel had reached rock bottom, they hit a new low. They owe the IRS almost $3 Billion for the period between 1998 and 2008. That's $1.80 Billion in taxes owed and $1.16 Billion in interest. What's Nortel's response?
"We had significant tax loss carry-forwards in the U.S., the size of which have been subject to review by the IRS. However, we are not aware of anything that would lead to a tax liability of that magnitude."
It might seem hard to believe, but having a tax debt with no idea how it happened is common for businesses, even giant ones like Nortel. The IRS doesn't make it easy for Business owners. And when they owe, they play hard ball. Here's some tips for current or soon to be business owners. With some prior research and knowledge, you should be able to avoid a mess with the IRS.
Small Business and Tax Debt, Tips for Tax Debt Prevention
Ignoring Debt: Small Businesses usually start out shaky. If you're just starting your own business and you have no experience, it's hard. You may even be in the red the first couple of years. But that's no reason to ignore your taxes. They are still due every year. And if you don't pay, the punishments will be severe.
How They'll Hit: The IRS can shut you down. This is a Small Business owners worst fear. But even more punishment can be dealt out. The IRS has the power to freeze your bank account. And if that's not bad enough, they can come to your house and Levy all your luxury items. They can even go after Accounts Receivable.
Don't Be Greedy: The IRS keeps a close eye on small businesses. They are looking out for obvious signs of Tax Fraud. These are called “Badges of Fraud.” Some common Badges of Fraud for small businesses are:
-Businesses with two sets of books, or none at all
-Ridiculous Expenditures claimed as “Business Expenses” (Like a new pool for your house.)
-Altered Checks
-False Receipts
Keep In Mind: Don't let my warnings scare you. There are items you can claim as tax deductible for your business. But watch out. Before you claim anything, make sure you can prove it was really used for your business.
-Travel Expenses
-Interest on Business Loans
-Work Equipment (Trucks, Computers, Office Supplies, etc.)
Getting Help: What if you already ignored your debt? If the IRS has already sent your notices, do not delay! At any moment, the IRS can use one of it's weapons of collections against you. Instead, you need to do your research and find out what's a best way you can pay them off. And if you don't know what to say when you call the IRS or you're too busy, you can contact a Tax Care Professional who can handle the situation for you.
Giving Your Cut: Things are going good. And when they are, put money to the side for Uncle Sam. Not paying your taxes can make or break you. So if you don't want the IRS to take your small Business from you, put the IRS first and remember to pay your taxes.