If there is one thing that’s always going to be a concern for business owners in all industries, it’s taxes. Let’s be honest: no one wants to have to pay them, but in the retail sector where fluctuating revenues and complex tax obligations are most featured, pay them you must!
Retail businesses especially can find themselves in financial distress fairly quickly when unpaid taxes are a feature. Fortunately, there are plenty of strategies around to help your retail business to manage, reduce and even eliminate its tax debt. So, let’s take a closer look at some of the ways that you can deal with your tax debt:
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Take a closer look at your finances
If you want to deal with any debt pertaining to tax, you need to know what your business finances are doing. What is the scope of your financial obligation and has your accountant explained it to you properly yet? In-store sales, online transactions and wholesale distributions are all various revenue streams that feed your business and they may all come with different tax implications. It’s on you (and your finance team) to gather all relevant financial data so that you’ll be equipped to explore tax debt management options.
Get on the phone with the IRS
Aaah, scary! Phone calls! It’s 2025 and while you can text your friends, when it comes to the IRS, you NEED to pick up the phone and have a conversation. Ignoring tax debt is not like ignoring other debts. In fact, it’s the worst thing that you can do. You need to communicate with the IRS to avoid possible garnishments, liens and levies on your income. You need to learn to talk to the IRS and acknowledge the debt. They cannot help you to make a plan for it or explore other options for debt reduction if you don’t have a conversation.
Consider the IRS Fresh Start Program
If you’re facing a bigger tax debt than you ever have, the Toggle Actions menu on the IRS Fresh Start Program is a valuable resource. The whole initiative is designed to help taxpayers who are struggling with their tax debt. The program offers different tools for eliminating and reducing tax liabilities like instalment agreements and an OIC – offer in compromise. When you utilize the IRS Fresh Start Program, you can figure out your options to reduce the burden of your tax debt.
Think about asking for a payment plan
There is nothing wrong with asking for a payment plan to get back on track in your business. If you can’t pay it in full, the IRS would rather hear that you’re willing to pay your debt with installments that are planned out, than not pay it at all. Retail businesses can benefit from extended terms but that’s only going to happen when you actually talk to the IRS, acknowledge the debt and work to break it down. If you have a strong willingness to cooperate, you’re going to be able to keep up with your repayments in a more manageable way.
Look into an OIC
An Offer in Compromise may be a viable option for your retail business if you’re in serious financial distress. This is a program that allows you to settle your tax debt for less than the full amount owed but the IRS will only approve this if they think you can’t pay it out by other means. To qualify for this, you need a detailed financial disclosure, which will include income, assets and expenses. You have to work with a tax professional here – you don’t want to make any mistakes.
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Think about bankruptcy
Ok, so this solution isn’t ideal for anyone and it should be considered as the last option for business retail owners who are facing a huge tax debt. This isn’t the way to go if you can avoid it. Some types of tax debt can be discharged through bankruptcy including certain income tax debts that are more than three years old. It does come with long term consequences, however, so ideally, avoid this route!
Get some professional help
Professional tax advice is absolutely necessary if you have a tax debt in the mail. Tax accountants and advisors can work with you to figure out how to manage your business tax debt. They’ll work with you to figure out the rules that the IRS set up and then give you advice on form submissions and preparing financial statements. They can give you the peace of mind that you need to ensure that you can resolve the debt.
Review your current tax practices
If you find that you’re in the hole of tax debt, take a look at the practices of your retail business. Are there reporting errors? Are there issues with payroll taxes? Preventing future issues can only occur when you’re aware of the current issues and staying on top of your tax. Ensuring that your business is registered for sales tax also helps to avoid that tax debt.
Talk about a penalty abatement
Did you know that tax penalties can push your debt so much higher than the original amount owed? If there is a valid reason for your tax issues, like a natural disaster or a serious illness, you might be able to apply for an abatement on the penalties. This means that the IRS could forgive some or all of the penalties associated, which makes it much easier for you to manage the actual debt without the fees attached.
Get back on track with payments
Once you have resolved your current debt, you need to make a point of staying on track with the payments in future. This includes paying your income and sales taxes on time every time, and working it out so that you are on top of things with your accountant. You don’t want to find that you’re behind with it again as the IRS may not be as forgiving next time.
