Can a Bankrupt Business Owner Request For Tax Debt Relief?
While businesses still not picking up, even to small businesses
, it is not a surprise to see business owners wanting negotiations with IRS. This business owner might be deep in tax debt to IRS. That even if he sold his business, it would not break-even to settle it. This business owner may just be praying right now for a tax debt relief.Bankruptcy, whether personal or business, can be used as a reason to ask for tax relief. What business owner will do is show latest financial and income statements that proved that his business is in peril. This means that at this point his capacity to settle tax debts is nil. IRS in turn will consider this, and might allow a relief.
This business owner may propose to IRS an "offer in compromise". This is a settlement that may grant reduction of a taxpayer's amount of tax due. Alternatively, it can help decrease abatement of tax penalties, but the taxpayer has to pay the full amount in staggered payments. Alternatively, tax dues can be totally wiped out if the situation of the business really merits it, such as liquidity.
Technicalities on how long tax due has been unpaid will, however, deter tax payers' hope for tax relief. According to the tax codes, if there are taxes unpaid for three years, this must be settled fully. And any tax obligations thereafter are the ones to be subjected to relief proceedings.
On the other hand, business owner can't use tax debt relief as a means to escape from paying local taxes. It is because local tax debts cannot be used against declaration of bankruptcy. Instead, this must be paid in full before debts on federal business income tax can reach a settlement.
Compliance of the business owner to settle with local tax codes is eminent among IRS, lest relief isn't granted. In other words, bankruptcy cannot be relied solely as a way to escape paying for taxes. It is because there are non negotiable tax debts that must be settled first. So if one doesn't want to be in this situation, he should always abide state and federal laws on taxes.
Can a Bankrupt Business Owner Request For Tax Debt Relief?
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