Running a business can be hectic, and it’s not unusual for some tasks to slip through – especially those related to taxes. If you have missed a tax deadline for your LLC, believe us that you’re not alone or the first business owner to have done this.

But while it’s a common issue, ignoring unpaid tax filings can lead to serious trouble. This is why it’s important to know what happens next, and even more importantly, what you can do about it. In this blog, let’s discuss the steps that can be taken to sort unpaid tax filings of LLCs.

Source: nolo.com

Back Tax Filings LLC, Why It’s a Big Deal?

When your LLC misses filing deadlines, whether for income taxes, payroll taxes, or sales taxes, the issue doesn’t just magically disappear. In fact, the longer you wait to fix it, the bigger your problem can become.

Here’s why back tax filings for an LLC matter so much:

Penalties Add Up Fast

The IRS and state tax agencies charge late filing and late payment penalties. Some penalties grow each month that goes by without paying the tax return.

Interest Doesn’t Take a Break

In addition to late penalties, you will also be charged interest on the unpaid tax amount. That means you could eventually owe far more than the original amount.

It Can Hurt Your Business Status

Many businesses are required by the state to stay current on taxes to remain in good standing. Falling behind may cause your LLC to be dissolved or lose its right to operate in the state.

Note:

Even if your LLC didn’t make any income during the year, you may still need to file a return. Filing zero returns is common for inactive LLCs or businesses in early stages. Consult a tax professional for better guidance and avoid triggering red flags with the IRS.

Unpaid Tax Filings LLC: What Happens Next?

So, what actually happens after you have missed your LLC tax filings?

You’ll Receive Notice

First, expect to receive a notice from the IRS or your state tax agency. These are typically polite but firm reminders that you missed a deadline. If you ignore the first one, you will receive more of those, usually with added urgency and financial consequences.

Penalties and Interest Begin to Add Up

As mentioned earlier, penalties for late filing and delayed payment will kick in. For federal taxes, the late filing penalty is usually 5% of the unpaid taxes for each month your return is late, up to 25%. In addition, interest also applies.

Collection Actions

If enough time passes and the debt grows, the IRS or the state can take action to collect what you owe. This may include:

• Freezing your business bank account
• Putting a lien on your business assets
• Garnishment of wages
• Seizing your property

You Might Lose LLC Protection

Failing to file taxes could lead your LLC to fall out of “good standing” with the state. In some cases, the state could even administratively dissolve your LLC. That means you’d lose the legal protections the LLC structure offers such as separating your personal assets from business liabilities.

Back Tax Filings LLC: How to Fix the Problem

Now that we have covered the consequences, let’s talk about the solutions. If you have missed a filing (or several), it’s important to take action sooner than later.

Gather Your Documents

Start by collecting all the necessary documents for the years you missed. This includes income statements, expenses, payroll records, and any 1099s your business received. Even if information is missing, it’s better to file an estimate and correct it later than to file nothing at all.

Work with a Tax Professional

This step is crucial in sorting the mess caused by unpaid taxes of your LLC. A tax professional can help you determine which filings are missing, prepare and file accurate returns for you, and even contact the IRS or state on your behalf. If needed, a tax professional can also negotiate payment plans or settlements for you.

Trying to handle back tax filings of LLC can be stressful and confusing. A tax expert will ensure everything is done right, and that too quickly.

Respond to IRS or State Notices

Don’t ignore the letters from the IRS or your state. Respond promptly, and if you’re unsure what the notice means, let your tax advisor handle the communication. Many issues can be resolved by just responding quickly and honestly.

Consider Penalty Relief

Depending on your situation, you might qualify for penalty relief. The IRS offers a “First-Time Penalty Abatement” for businesses that are otherwise compliant but missed a deadline. If you qualify, some or all of your penalties could be waived.

Set Up a Payment Plan

If you owe taxes but can’t pay in full, don’t panic. The IRS and most states offer installment plans to allow businesses to pay their back taxes over a certain period without falling into financial troubles.

What Happens If My Business Taxes are Late?

To put it simply, late tax filings for your business can snowball. You may face growing penalties, interest charges, and even legal problems. But it doesn’t mean all is lost.

Many small business owners are able to recover from tax problems. However, you must act fast, stay transparent, and seek professional support.

Need Help? Let Us Step In

At Monily, we have helped numerous LLCs catch up on unpaid tax filings and get back on track. Whether your business has missed one return or several years’ worth, we are here to make the process stress-free and simple for you.

We specialize in unpaid tax filing of LLCs, IRS negotiations, and setting up payment plans that actually work for small businesses. We also ensure that we help you build a system that can help you stay compliant moving forward.

If you’re struggling with unpaid LLC tax filings and need expert professionals to sort this for you, reach out to us and let’s fix this together.

Raza Agha

Raza Agha is a Senior Manager at Monily, specializing in global finance accounting and management. With a decade of experience, including roles as Accounting Manager and Assistant Manager at Health Grades Analytics, Raza drives financial efficiency and accuracy. He holds an MBA and Bachelor's degree in Accounting and Finance from The University of Texas at Austin and is a qualified ACA ICAEW and ACCA member. Based in Texas, Raza excels in strategic financial planning and operations.