Running a business is hard enough work – navigating the complexity of state tax penalties is something you just don’t have time for. Still, these penalties should be taken very seriously, otherwise it’s likely they will grow and become even more difficult to pay off.
If your business is facing state tax penalties, the first step will be to understand your situation. Let’s discuss what these penalties are and what you can do to take care of them.
WHY DO STATE TAX PENALTIES HAPPEN?
Among a variety of different reasons, state tax penalties can be issued as a result of owing back taxes or underreporting income.
Every state has numerous penalties that they can assess against businesses. The two most common mistakes that lead to state penalties are: failing to file or failing to pay on time. However, you might be surprised to find out just how many penalties are at the state’s disposal.
One possible solution to tax penalties is to create a compromise with the state Tax Authorities and set up an Installment Agreement, allowing you to make payments over time.
WHY ARE PENALTIES SO HIGH?
These penalty fees may appear to be very excessive to you. The state Taxing Authority’s theory is that heavy penalties discourage businesses from continually making payment mistakes and not paying their withholding or income taxes.
Due to the complexity of calculating the assessment of tax penalties, the only way you will find out how much you’ll owe is after you have received notification of the penalties. By that time, your business is facing a tax bill that can be extremely difficult to pay.
WHAT CAN YOU DO?
As a business owner, if you find yourself in a situation where your business owes excessive state tax penalties, it’s time to develop a resolution strategy. An Installment Agreement is one option to get current, but in order to come up with the best resolution for your business, you’ll need to arm yourself with as much information as possible. If you would like to read more about Installment Agreements, download our free guide.
If you would rather to talk to someone, reach out to one of our tax resolution specialists to begin getting your resolution rolling.
In certain circumstances, the business can file for an abatement of penalties assessed and get some tax relief. Generally, if your business is facing penalties due to circumstances out of your control, chances are that a formal request for abatement should be filed and negotiated.
Dealing with this issue should be your top priority. Now is the time to resolve your tax problem and get back to doing what you do best – running your business.
Connect with a tax expert about your state tax penalty situation.