Tax Time. No Dough. Don't Sweat. The IRS offers several options to business owners struggling to meet the April 15 deadline.

By Carol Tice Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

Some business owners may be getting a nasty, sinking feeling right now, as they realize that April 15 is looming and they can't pay their taxes. That can happen easily if business was good for much of 2008 but has fallen off since. Michael Rozbruch, CEO of Tax Resolution Services in Encino, Calif., says he expects 2009 to set a record for the number of taxpayers unable to pay their full tax bill on time.

Fortunately, the Internal Revenue Service offers several options for taxpayers in trouble. The most important thing to do is tell the IRS right away. If you're honest about the situation--and continue filing tax forms on time--you may be able to work out a payment plan, or settle the debt. If you don't file, there's no time limit on how long the IRS can try to collect.

Rozbruch says filing on time will save you a 25 percent late penalty. When you send your tax return, include a check for a small amount--even $10.

"This creates a record of your good-faith, credible effort to send in some money," Rozbruch notes.

Possible strategies for resolving a tax debt include:

  • Noncollectible status. If you believe your problems are temporary, you can have your account placed in "currently not collectible" status. You'll need to prove your monthly income equals or exceeds essential expenses, and that any assets such as home equity are inaccessible to you now.
  • Short-term payoff. If you'll have the money you need shortly, you can avoid fees by arranging to pay your taxes in up to five monthly payments.
  • Installment plan. A Payment Agreement gives you up to two years to pay the tax debt in monthly installments. Interest and fees will rack up over time, so it's beneficial to pay it off ASAP. The IRS is currently charging 5 percent interest--but it's compounded daily, so it adds up fast. You can apply online here.
  • Settlement offer. If you can demonstrate that you'll likely never be able to pay the IRS all you owe, you can apply for an Offer in Compromise. The offer will propose settling the debt by paying a smaller amount in monthly installments.

Not all offers in compromise are accepted--in 2007, Rozbruch says, the IRS accepted just 12,000 offers of 46,000 submitted. But if you can make a strong case, you may be able to reduce the tax you owe. If your offer is rejected, you can appeal. The IRS has indicated it will review changes in home values in rejected offers to see whether sinking home values now qualify the applicant.

If you set up any kind of payment plan with IRS, be sure to make your payments. If you miss payments, the IRS may demand immediate payment in full. If you can't make a payment, call the IRS right away. Given the economy, Rozbruch says, the IRS has indicated it may be lenient with taxpayers who're upfront about their problem.

Carol Tice

Owner of Make a Living Writing

Longtime Seattle business writer Carol Tice has written for Entrepreneur, Forbes, Delta Sky and many more. She writes the award-winning Make a Living Writing blog. Her new ebook for Oberlo is Crowdfunding for Entrepreneurs.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Leadership

7 Telltale Signs of a Weak Leader

Whether a bully or a people pleaser who can't tell hard truths, poor leadership takes many forms.

Business News

'Feels Like a Slap in the Face': Some JPMorgan Employees Reportedly Aren't Happy With Their Bonuses

JPMorgan reported a record-high net income for 2024 of $58.5 billion.

Business News

People Are Selling Old Phones With TikTok Installed for Thousands of Dollars — Here's Why

There are listings on resale sites for iPhones and Androids with TikTok downloaded for up to $10,000.

Business News

A 74-Year-Old Musician Makes a Million a Year From an Unpopular Song Written Nearly 50 Years Ago. Here's How.

The song never became a Billboard hit but proved extremely lucrative for its writer.

Starting a Business

He Immigrated to the U.S. and Started a Business. It's 'Not the Sexiest' But Sells Over 6,000 Units Daily — Up to $25,000 Apiece — Anyway.

When 16-year-old Amir Loloi emigrated from Iran, he didn't intend to stay in the U.S. forever. Then those plans changed.