Risks to Avoid When Handling Your Tax Notices
Receiving IRS notices can be worrisome, but millions of taxpayers get them yearly, and preparation is critical. These notices can easily get buried in a stack of paperwork, leading to missed tax notices, which can incur substantial – but avoidable – penalties.
In this post, we will talk about avoiding common IRS notice risks due to incorrect filing and missing notices to help you remain in good standing with the IRS. We'll also cover how NOTICENINJA, our comprehensive tax notice management software, can streamline this process further and prevent risks when handling notices.
Fines for Non-Compliance
Corporations not in good standing with the IRS can face serious consequences. First-time offenders may incur hefty penalties and accrued interest on missed payments. However, repercussions may escalate for repeat offenders:
- Tax liens: The IRS may place a federal tax lien on corporate assets to make a legal claim to the property, which includes real estate or other assets. Tax liens make it difficult to sell or transfer assets and will negatively impact company credit ratings.
- Levies: The IRS can levy – or seize – corporate bank accounts, accounts receivable, or other assets to satisfy unpaid tax debts. Levies can significantly disrupt your company's operations.
- Revocation of business status: In highly severe cases of non-compliance, the IRS has the authority to revoke a company's tax-exempt status or dissolve the business entity.
- Warrants: The agency can issue arrest warrants for Offers and Owners based on registration records.
Non-compliance is a serious issue – business leaders should take all necessary measures to avoid it.
Legal Implications for Business Leaders
Under certain circumstances, the IRS will deem business leaders legally liable for missed IRS tax payments and returns. The most common reasons are:
- Responsibility for financial matters: C-suite leaders, such as CEOs and CFOs, can be held liable for any missed IRS notices and payments.
- Willful neglect: Business leaders may be held liable if the IRS deems they purposely neglected their duty to address IRS notices. Willful neglect implies a deliberate failure to act despite being aware of the IRS's communication.
- Fraudulent Activities: In fraud or tax evasion cases, business leaders can be subject to civil and criminal penalties. More severe circumstances can even result in imprisonment.
It's important to note that C-suite executives can receive notices at their home addresses. Persistent neglect of these notices could lead to arrest warrants being issued. Therefore, do not disregard any IRS notices under any circumstances.
Damage to Your Organization's Reputation
Legal disputes or non-compliance matters with the IRS are unlikely to remain confidential. Once they become public knowledge, your company's reputation may suffer, making it challenging to rebuild trust with customers, shareholders, and partners. Regaining credibility can be a formidable task once trust has been eroded.
Disruptions to Business Operations
An unorganized company is more likely to misplace an IRS tax notice, causing unnecessary stress and wasted time. It's advisable to promptly address all IRS correspondence or invest in IRS notice automation software to stay organized. Delaying action until you receive penalty notices can divert your employees' focus from critical tasks like maintaining efficient business operations.
Puts Undue Financial Strain on Your Company
The extent of IRS fines and penalties can vary based on non-compliance, but they become quite costly. Moreover, any funds paid to the IRS directly reduce your company's resources. The accumulation of IRS penalties can place increasing financial pressure on your organization.
Maintain Compliance With NOTICENINJA
You are not alone if you're juggling numerous responsibilities and find it challenging to make room for IRS compliance. We developed NOTICENINJA, our automated tax notice management platform, to assist business leaders in staying organized, ensuring IRS compliance, and contributing to your company's prosperity.
Learn more today about how NOTICENINJA can streamline tax management and ensure your business remains compliant.