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Factoring Can Help Small Businesses Pay 2011 Taxes

 Every year small businesses face tax time in the spring and like it or not, they must prepare their information for taxes. Many 2011 Federal laws take effect, so if you are a small business owner, you must be prepared.

It is important to make sure you pay your taxes, because the Internal Revenue Service (IRS) is not a lender, and by not paying taxes, you would ultimately be borrowing from the Government. But you also would be borrowing at extremely costly rates. Compounding interest and penalties on top of the amount of taxes you own can break a company. Yet unpaid taxes will accrue daily interest rates, not to mention the monthly five percent penalty each and every month for up to 5 months and a maximum of 25 percent penalties due in sum total.

One of the most common tax payment problems for many small businesses comes from not paying their payroll tax. You could put your entire business in jeopardy if you were to fail to pay 941 payroll taxes. This could easily have a drastic effect on your assets. If the company is dissolved, the IRS will still require you to pay outstanding payroll tax balances.

The simplest advice for tax problems is to be pro-active at all times. Ignoring it will not make it disappear. The reality is that if you do not have enough money to pay your business taxes on a timely basis, then your business is more than likely improperly capitalized. 

But if you have not paid your taxes, the IRS will first send you a letter for the balance of taxes that are due. Do not ignore this letter, because if you do not respond, and just ignore them, then they will assign a case worker to get in touch with you.  If you speak with them, then at this point, either a Notice of Federal Tax Lien is filed or a payment plan is negotiated. With good cooperation a payment plan can be in place without having a formal tax lien. You can usually set up a payment plan with the IRS, but once a payment plan is in place, it is absolutely imperative that payments are made on time.

Here is how factoring can actually assist in situations where there is a delinquency. But once a lien has been levied against a company it will require written subordination from the IRS in order for any commercial finance company to even consider funding.  However once an IRS payment schedule is in place, the factoring company may send advances from invoices directly to the IRS, insuring that payments are being made in a timely fashion per the agreement with the IRS.

All you need as a company are receivables then invoice factoring can help provide fast cash to help you begin paying down your tax debt. Some of the funds can be used for other expenses and some to pay down taxes owed.

Tax problems today can be remedied, but whatever you do, do not ever ignore the IRS, ever.

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