Settling your tax debts
As the old saying goes, “only two things in life are certain, death and taxes”. In the current economic climate, many businesses are dying off, but the taxes associated with them don’t necessarily “die” so quick. Getting into debt with the tax authorities is never a good idea, but if your business is failing this may be inevitable. Over the years I have had some experience with tax authorities (mainly the Irish Revenue Commissioners), so here are some tips:
1. Contact the tax authorities as soon as possible. Informing them not only buys some time, but it may also begin a negotiation process.
2. Assess the taxes owed. Once you know what is owed, you’re in a better position to see how bad the problem is.
3. Assess all assets and liabilities of your business. If you are a sole trader or part of a partnership, assess all personal assets, liabilities and living expenses. Undoubtedly the tax authority will do this exercise so you might as well be one step ahead.
4. From 2 & 3, you should be able to start a negotiation process. As I said in 1 above, by contacting the tax authority early, you have a much better chance of doing some kind of deal.
5. If you can make a deal to pay a lower amount than you owe, or to pay by instalments, be sure to stick to the arrangement or inform the tax authority if you have problems.
While dealing with tax debts is not the nicest thing in the world, try to be honest and do a realistic deal where possible. Ignoring the problem makes it worse. And, particularly if you are a sole trader, ignoring a tax debt can affect any future business prospects.