Behind on Taxes? What to Do Now

73% of businesses that owe back taxes end up paying double what they originally owed. Here’s how to make sure you’re in the 27% who resolve it smart and keep more money in your pocket.

The difference between the majority who get crushed by tax debt and the smart minority who resolve it strategically? Taking the right action quickly instead of hoping the problem goes away.

Here’s what to do when you’re behind on taxes.

What NOT to Do When You’re Behind

Don’t Ignore It

The Reality: Tax debt doesn’t disappear. The IRS has 10 years to collect, but states like New York have 20 years. Worse, certain actions can restart or extend these collection periods, meaning you could face collection efforts for decades.

Don’t Fall for Scams

Red Flags: Companies promising to settle your debt for “pennies on the dollar,” asking for large upfront fees, or guaranteeing specific outcomes.

The Truth: Legitimate tax resolution requires detailed financial analysis and realistic expectations. There are no magic shortcuts.

Don’t Try Complex Resolutions Yourself

Simple Payment Plans: You might handle these yourself if you owe less than $10,000.

Everything Else: Offers in compromise, penalty abatement, payroll tax issues, and business tax problems need professional help. The IRS rejects most DIY attempts at complex resolutions.

Don’t Use Tax Debt Money for Other Things

The Trap: Using money you should pay to the IRS for business expenses or personal needs just creates a bigger problem later with more penalties and interest.

The Tax Problem That Gets Worse Every Day

The Real Numbers:

• Failure to Pay Penalty: 0.5% of unpaid taxes per month (up to 25%)
• Interest: Currently around 8% annually, compounded daily
• Failure to File Penalty: 5% per month if you haven’t filed returns (up to 25%)
• State Penalties: Some states, like New York, add penalties daily – meaning you’re getting hit with new charges every single day you wait

Example: Owe $10,000 in taxes? After one year, you could owe $13,000+ with penalties and interest – and those penalties never stop accumulating.

What Collection Actions Look Like

It Starts With Letters, phone calls, and liens that destroy your credit.

It Escalates To: Bank levies that empty your accounts, wage garnishments that take up to 70% of your paycheck, asset seizure, and business closure (especially for payroll tax issues).

Timeline: Collection actions typically start 6-12 months after you first owe money, faster for payroll taxes.

What Tax Resolution Actually Involves

Tax resolution isn’t just calling the IRS and asking for help. It’s a strategic process that starts with getting you compliant (filing missing returns), analyzing your complete financial situation, and then negotiating the best possible outcome.

The process involves determining which resolution option works for your specific circumstances, preparing detailed documentation that the IRS requires, and negotiating with IRS representatives who handle these cases daily.

Your Resolution Options

Payment Plans (Installment Agreements)

Monthly payments based on your ability to pay. Most people qualify if they owe less than $50,000 and can pay within 6 years. Requires proper financial analysis to get terms you can actually afford.

Offer in Compromise

Settling for less than you owe, but only if you truly can’t pay the full amount. Requires detailed financial disclosure and strategic presentation. The IRS only accepts about 25% of offers.

Penalty Abatement

Getting penalties removed for reasonable cause (first-time filers, illness, disasters). Can save thousands in penalties. Requires proper documentation and strategic presentation.

Currently Not Collectible Status

Temporary halt when you genuinely can’t pay due to financial hardship. Collection actions stop, but interest and penalties continue accumulating.

Each option has different qualification requirements and negotiation strategies. What works for one situation won’t work for another.

When You Need Professional Help vs. DIY

You Might Handle It Yourself If:

• You owe less than $10,000 in simple income tax
• You can pay it off within 3 years
• You just need a basic payment plan
• You’re current on all filings

Get Professional Help If:

• You owe payroll taxes (personal liability risk)
• You haven’t filed returns for multiple years
• You’re considering an offer in compromise
• You’re facing collection actions (levies, garnishments)
• You owe more than $25,000
• Your case involves business taxes or multiple tax years

Red Flags Needing Immediate Help

• Notice of Intent to Levy received
• Bank accounts frozen
• Payroll tax penalties (personal liability)
• Multiple unfiled returns
• Asset seizure threats

Success Stories: Real Tax Problems Solved

The Construction Company

Problem: $45,000 in unpaid payroll taxes from the COVID cash flow crisis.
Solution: 5-year payment plan at $850/month with cash flow management systems.
Outcome: Business stayed open, debt being paid down, no missed payments in 18 months.

The NEMT Business

Problem: $32,000 in tax debt from three years of unfiled returns during rapid growth.
Solution: Filed missing returns, first-time penalty abatement, negotiated payment plan.
Outcome: $12,000 in penalties removed, $650/month payments, back in compliance for government contracts

The Solo Contractor

Problem: $18,000 in estimated tax debt plus penalties from irregular income.
Solution: Penalty abatement, payment plan, and ongoing quarterly planning.
Outcome: $4,500 in penalties removed, 3-year plan, and proper system to prevent future issues.

Your Next Step

Don’t become part of the 73% who pay double. Smart business owners resolve tax problems strategically and keep more of their hard-earned money.

Facing tax debt or collection actions? Visit https://downiesolutions.com or email hello@downiesolutions.com to schedule a tax resolution consultation. As an Enrolled Agent practice, we specialize in getting businesses back in compliance while protecting as much of your money as possible.

Not sure what you owe? We can help you get a complete picture of your tax situation and create a strategic plan to resolve it before it gets worse.

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Downie Solutions helps business owners resolve tax problems and get back in compliance. As an Enrolled Agent practice based in Brooklyn, NY, we represent clients nationwide before the IRS.