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What Happens If A Business Doesn’t Pay Taxes?

As your trusted advisors at SD Associates, P.C., we know the importance of businesses fulfilling their tax obligations. Just like individual taxpayers, businesses pay various forms of taxes based on various figures. Paying taxes is not only a legal responsibility – it also contributes to the development of the society in which your business operates.

However, some businesses might have trouble paying their taxes or may unintentionally overlook their obligations. So, what happens when businesses don’t pay their taxes? Let’s delve into the potential consequences.

Penalties and Interest

When businesses fail to file or pay their taxes on time, they face penalties and interest charges. According to the IRS, the penalty for failing to pay is 0.5% of unpaid taxes for every month the balance goes unaddressed. If the taxes are not paid within 10 days of receiving a notice from the IRS, the penalty increases to 1% per month. Charges are taken per month, even if the tax balance is settled before the end of the month. 

Legal Consequences

Not paying business taxes can also lead to severe legal consequences. The IRS may file a Notice of Federal Tax Lien which publicly alerts creditors that the government has a legal right to your business’s property. This can damage your business’s credit rating and make it challenging to secure loans or attract investors.

In extreme cases, the IRS can initiate criminal proceedings for tax evasion. This could potentially lead to hefty fines and even imprisonment.

Audit Risks

The failure to pay taxes can increase the chances of an IRS audit. An audit involves an official review of your financial accounts and transactions to verify that you’ve paid the correct amount of tax. Audits can be time-consuming, intrusive, and may lead to additional fines if discrepancies are found.

The IRS Collection Process

If your business owes taxes and doesn’t take action to resolve this debt, the IRS can start collection procedures. This can include seizing your business’s assets such as bank accounts, accounts receivable, equipment, and even real estate.

Preventing Non-Payment of Taxes

To prevent these serious consequences, it is essential for businesses to stay informed and seek professional assistance. SD Associates, P.C. provides comprehensive tax services to help you navigate your tax obligations with confidence.

Remember, if your business is having difficulty meeting its tax obligations, the IRS offers options such as payment plans and offers in compromise. These alternatives can provide much-needed relief and help your business stay on track.

Contact SD Associates, P.C Today!

Failing to pay taxes can have serious implications for your business, from financial penalties and legal consequences to increased audit risk and the potential seizure of assets. If you need guidance in handling your business taxes, don’t hesitate to reach out to our team at SD Associates, P.C. – we’re here to help. Contact us today at (215) 517-5600.