The IRS receives millions of dollars each year from penalties, most of which come from businesses that failed to pay or file taxes. Therefore, it is crucial to know tax compliance and avoid costly penalties. There are unexpected circumstances that attract IRS penalties to your corporation such as missed deadlines and service debts.
You should work with tax advisors like https://denvertaxadvisor.com/ to help you avoid these severe consequences. Some of the most common consequences are:
You will receive an outline for the due date and a notice from the IRS if your business fails to pay taxes on time. The due date and the notification are usually between thirty and sixty days which is enough time for you to respond accordingly. Ignoring these notices could cause you additional fees, penalties, or even an IRS specialist visiting your property.
Fees and Late Penalties
If you fail to file business taxes or do not pay the entire tax amount, you may receive a 10 to 15 percent tax penalty. This penalty applies to each month that the payment is delinquent and accumulates up to a maximum of 5 percent. You can also get an additional penalty of 135 percent, an additional 3 percent, and an interest equal to the stipulated federal short-term rate. If you pay your taxes a week after the deadline, you attract a 2 percent penalty from the IRS.
Seizures, Federal Levies, and Tax Liens
With a federal payment levy program, your business does not have access to certain benefits such as Medicare provider, select federal salaries, supplier payments, specific individual salaries from Social Security, and military retirement benefits.
You may also get property seizures from the IRS. Property seizure is one of the most impactful actions of the IRS. If you fail to pay or file business taxes, the IRS is allowed to levy the business assets. The IRS will seize the company equipment, business property itself, and cars if you fail to pay tax in full or on time.
The federal government may also place a tax lien against your business if you neglect your tax bill. When this happens, the IRS becomes superior over your debtors if the company becomes insolvent. If your business is insolvent, and you sell its assets, the IRS will receive the money before you do.
Liens significantly affect your credit score. Your credit score depends on your debt-to-income ratio, payment history, and the model used to calculate the score. Even if you manage to clear your lien, it does not go away from your records for ten years.
If the IRS realizes that your business evaded payment through fraudulent means, then a tax lien becomes a criminal matter. Some of the activities regarded as fraudulent by the IRS include filing false tax returns, not reporting cash receipts accurately, hiding income, and creating fraudulent invoices. These acts are criminal intention acts and not unintentional neglect.
Furthermore, intentionally failing to pay taxes is a felony that attracts a punishable fine of five years in prison, $10 000, or both. Pay all your business taxes on time to avoid the dire consequences associated with failure to pay taxes. Work with professional tax advisors to help you file your business returns.