Wouldn’t it be nice if investing time and money guaranteed the long-term success and stability of your business? If your passion was always profitable? Unfortunately, this isn’t always the case. When you’ve exhausted all of your options and concluded that you can no longer continue operations, it’s emotionally devastating. Ann Irons, a professional tax preparer and CPA in Bellingham, MA, says that many small business owners’ distress is so great that they neglect to consider all of their options.

Option #1: File for Bankruptcy

Unable to pay your current or past-due federal taxes? Chapter 13 is the most commonly filed type of bankruptcy for individual business owners, or you can file Chapter 7 or Chapter 11. If you choose this option, you must be aware of your obligations. Failure to meet these requirements could result in having your case dismissed.

• Once you’ve filed for bankruptcy, you must still meet your current tax obligations as they are due.
• Tax returns for periods that end within four years of filing for bankruptcy must be filed.
• As long as your case is open, you will file all requisite returns, or you must request an extension to file.

As a partnership or corporation, you will use Chapter 11 or Chapter 7. There are several less common types of bankruptcy, including codes for international cases, farmers, and even fishermen. Ann will walk you through your options to determine which works best for you and your business.

Option #2: Request a Payment Plan

If you are unwilling or unable to file for bankruptcy, you may be eligible to work out a payment plan with the IRS. Expect to pay fees when using this option. If you are considered low-income, a reduced fee is available. A small business owner who owes payroll taxes of $25,000 or less can begin requesting a payment plan online.

Option #3: Make an Offer in Compromise

The IRS allows some taxpayers to pay less than the total amount owed, usually when repaying the debt creates a financial hardship or if you are not able to pay your full tax liability. The IRS will decide whether to accept your offer based on income, expenses, and the value of your assets.

Closing your business is never ideal. We can help. To learn more about small business accounting and financial services, or to request a consultation with Ann Irons, CPA, LLC, contact our Bellingham, MA office at 508-966-0700. We serve individuals, family business, real estate law agencies, and small businesses in and around Boston, Woonsocket, Franklin, Medway, Milford, and nearby communities.