Will the Internal Revenue Service (IRS) force a business to close?
The IRS can go about this in a variety of ways. First, the IRS can show up at your office with a padlock, lock everyone out, and seize everything in the office. The second way, which is more likely, is the IRS will close the business by making life so tough on the business that it simply fails.
Before the IRS can do either of these actions they have to follow due diligence by following all laws and procedures. Regardless, this isn’t hard for them. There has to be a tax due, and the IRS has to send the proper notice to the taxpayer (or to the taxpayer’s last known address). The notice to watch for is Form 1058: the “final notice of intent to levy”. This letter gives notice to the taxpayer that the IRS can seize assets, levy bank accounts and accounts receivables, and garnish wages, etc. The letter gives 30 days to file an appeal (which we HIGHLY recommend here at Advanced Tax Solutions). After the 30 days, the IRS has to wait 15 more days in case the appeal is in the mail. After that, the IRS is wielding a mighty big stick because it can indeed do all of the things it outlined in their letter to the taxpayer. The IRS It can liquidate the business with no further notice or discussion.
After the time has lapsed, and if no appeal is filed, the IRS can lock you out of your business and shut it down. Generally an auction follows where the IRS sells any assets it has found.
However, it is important to keep in mind the second way the IRS forces a business to close. In other words, the IRS will use other means if it really wants to shut a business down. They still have to follow the procedures outlined above regarding Form 1058, but instead of showing up with locks, they make it very difficult for the business to survive. They will levy bank accounts (take all the money) and send levy notices to all people who owe the business money stating that, by law, they must pay the money that was due to the business directly to the IRS. By taking all the business’s cash, and then taking all hope of future cash, the business will not last long. Generally they will also file a notice of tax lien, which also makes it nearly impossible to borrow money or sell assets.
The above scenario is more common than you may expect. However, it can be avoided in many cases.
In order to avoid this it’s always best to be proactive. Try to get a solution before the Form 1058 notice arrives; or, if it does arrive, make sure you file an appeal to offer other solutions rather than the liquidation of your business.
The IRS’s end goal is not necessarily to shut down your business. Their goal is to get paid.
Offering an alternative solution is critical to avoiding the drastic levy and seizure actions. Sometimes people can borrow and pay the IRS in full. When that’s not possible, a payment arrangement with the IRS may be the best route to take. If the circumstances warrant it, sometimes an Offer to settle the debt for less than what you owe can be a great solution. This is called an Offer In Compromise. Nevertheless, whatever the solution may be, it is always good to be proactive and get a resolution before the IRS shows up to enforce collections.
If you have a business that owes back taxes (especially payroll taxes) come in to an Advanced Tax Solutions location and discuss your situation with us. The initial meeting is free and you may find the professional advice enlightening. It may be the difference between making it through a business closure crisis or not. Contact us today!