Depending on the structure of the business you run, your U.S. income tax return will be due on March 15 or April 15, 2020, unless you file for a six-month extension. However, if September 16 or October 15 rolls around and the IRS hasn’t heard from you, you will receive a Notice CP515B in the mail.
What Is A Notice CP515B?
When the IRS believes that your business owes taxes and you have not filed your return by the due date, it will send you a Notice CP515B requesting that you file the return immediately and complete a response form to indicate whether you’ve already filed your return or why you don’t believe you have to file one. If you don’t respond, the IRS may reach its own decision on how much your business owes and apply interests and penalties that accrue until you pay.
If you can’t afford to pay your 2019 taxes when they come due, it’s important to send your return anyway, as the penalties for filing late are more severe than those for overdue payments. If you run a sole proprietorship, the late filing penalty is 5% of the balance owing for each month or portion of a month that your return is overdue, up to a maximum of 25% of the unpaid tax.
Other business entities face the following penalties:
- Partnerships, S Corporations, and LLCs: If you run a partnership, S corporation, or LLC that is classified as a partnership for taxation purposes, you are penalized $195 a month per managing member for a maximum of 12 months. S corporations receive an additional penalty of ½ of 1% on the unpaid tax for each month that the return is overdue.
- C-Corporations and LLCs: Like sole proprietorships, c-corporations and LLCs that elect corporate status for tax purposes are assessed a penalty equal to 5% of the unpaid balance per month or portion of a month, up to 25% of the amount owing. They also receive the ½ of 1% penalty that is levied on S-corporations for each month the return remains unfiled.
What If You Can’t Pay Your Business Taxes?
Even if you can’t pay your 2019 business taxes, file the return right away, as the IRS won’t entertain a payment agreement until you’re in filing and payment compliance. Depending on your circumstances, you may be able to address your tax debt via one of the following forms of relief:
- In-business Trust Fund Express Installment Agreement: If your business tax debt is $25,000 or less, you can apply for an in-business trust fund express installment agreement, which you pay what you owe over 24 months. If the debt is higher, you can apply for this agreement after you have gotten the balance down to $25,000.
- Streamlined Installment Agreement: You may qualify for a Streamlined Installment Agreement if the business owes $25,000 or less and can pay it over six years or before the debt becomes legally uncollectible.
- Other Payment Plan: If your business owes more than $25,000 and is ineligible for or can’t sustain a Streamlined Installment Agreement, a monthly payment plan may still be approved, but the IRS will require full financial disclosure from you. If payroll or excise taxes are involved, it will assign a revenue officer to your case to determine whether it should assess any trust fund taxes.
- Offer in Compromise: You may be able to propose an offer in compromise if your business owes more than it can reasonably repay. The IRS will look at the company’s reasonable collection potential, or what it could hope to collect given the company’s finances and assets. If your offer in compromise is equal to or more than this reasonable collection potential, it has a good chance of being accepted.
Speak with a New Jersey Tax Debt Attorney
It can be complicated for a business to qualify for tax relief, but with representation and guidance from a seasoned tax debt attorney, you can achieve a fair and sustainable resolution of your case. Attorney Brad Paladini holds a Master of Laws in Taxation and has dedicated his practice to helping individuals and businesses overcome their IRS challenges with minimum financial loss. To schedule a consultation, please call 201-381-4472 or complete our online form.