For the small businessman, or woman, having a tax debt can be a nightmare: not only do you have the debt itself to deal with, but also the bureaucracy that comes with owing money to a government body, a combination not conducive to sleeping well at night!  However, it doesn’t have to be that way,  so here’s a quick low down of ideas to help you reduce your tax debt and thus sleep more easily!

  • Many small businesses are ‘caught out’ by tax when they suddenly start doing a brisk trade after a slow start.  Even if your business has been sufficiently small that you have been doing your own book-keeping, it is worth employing an accountant to look at your books if you find yourself heading towards a tax debt situation.   An accountant is not only there to keep your books in order, but can also advise you on ways to reduce tax debt, as an accountant will be aware of any tax breaks that are relevant to the relative sector of service or industry of your company and will know whether you will be able to access these.
  • An accountant should also be aware of any general tax breaks that could help you towards a tax debt resolution, such as by facilitating any new business grants that your company should be eligible for, which could help towards paying off any tax debts and to keep your business afloat.
  • Contrary to popular belief, the government tax officials aren’t really sitting around just waiting to pounce and close down small businesses.  On the contrary, these officials could indeed be another professional body to call upon if you need tax debt help.  They will be well placed to advise you of possible tax debt solutions, including ways to reduce the debt itself or to plan repayment so that your business can keep afloat at the same time. This solution-focused approach is particularly important if your business is actually doing well but you have been caught out tax-wise by sudden success.
  • If you are new to running a small business, take active steps to prevent tax debt right from the start.   Organize a separate bank account for your tax money to go into and have a direct debit  from your business account  that pays a set amount into your tax account on a monthly basis.  Your book-keeper or accountant  should be able to advise you of the right amount, based on your turnover, but if you are doing things yourself  initially, putting aside approximately 25% of your turnover each month is a good baseline.  Make sure that you don’t have a debit card for this account, or if you do have one, don’t activate it!   This way you will avoid being able to easily dip into it – it’s not for emergencies, it’s for your tax bill!

As with any aspect of business, no-one expects you to know it all straight away, tax included, so if you run into tax debt problems, or want to avoid doing so, take advice from the professionals as early as you can, so that you can sleep easy and get the rest you need to keep working hard!

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  4. Undertaking a Debt Relief Program
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  6. IRS Debt Settlement
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Filed under: Clear Debt • Debt Relief • Tax Debt

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