If you own a small business, there is plenty to worry about: payroll, production, meeting client and customer expectations, and meeting your financial commitments. If you also owe back taxes, you run the risk of the IRS levying your accounts receivable unless you take prompt action.
If you have received correspondence from the IRS and have either not responded to their notices or have not taken any action in clearing your tax debt, the IRS has the authority to levy your accounts receivable in order to recover the outstanding tax debt.
This just doesn’t apply to an outstanding business tax obligation; if you have an outstanding tax debt for your personal taxes, your accounts receivable is an asset that can be levied by the IRS.
Levying assets is the last resort for the IRS. If you haven’t responded to any prior communications or notices from the IRS, including a Notice for Demand of Payment and Final Notice of Intent to Levy, the IRS sees no alternative but to levy your assets, including any business assets.
What Will Happen Next
Once the IRS has begun to levy your accounts receivable, your clients and customers will receive a notice instructing them to re-direct their payments to the IRS rather than paying your company.
This is not only embarrassing for you, the business owner, but it can create problems in the future. Even after your tax debt has been cleared, clients and customers may mistakenly continue to mail their payments intended for your business to the IRS.
How To Avoid This Scenario
By now, you’re reading this thinking, “This could end badly.” Not so fast. There are ways you can avoid an IRS levy of your personal and business assets.
- Since your accounts receivable is an asset, be diligent in managing your personal and business tax debt. The minute you realize your tax debt is more than you can handle, enlist in a qualified tax professional who can help you negotiate with the IRS. Don’t wait.
- If you do receive a notice from the IRS regarding your tax debt, don’t ignore it. Instead, reply quickly to the address or phone number provided on the notice.
- File your business and personal returns on time to avoid penalties.
- You may want to consider filing an estimated business tax return each quarter. Your tax pro can help you decide if this is a viable option.
Facing an IRS levy of your accounts receivable is a nightmare that you would never want to face. After all, running a small business is stressful enough without having to worry about the IRS seizing your hard-earned accounts receivable.
By understanding the consequences of not responding to IRS notices regarding business and/or personal tax debt and taking a proactive approach in responding to any IRS correspondence, you’ll be less vulnerable to an IRS levy.
First and foremost, get in touch with a licensed tax professional who can advise you of your rights and responsibilities should you be facing delinquent personal or business taxes. Don’t delay. We have fully licensed and qualified Enrolled Agents and tax attorneys who can help you navigate the tax debt process.
Get started today by clicking on the white “Start Chat” button at the top right-hand corner of any of our webpages. We’re here to help.