Pay your taxes
Hey, I’m Michael Eckstein 👋, and this is ‘Ordinary & Necessary’, a weekly newsletter about the boring business topics that don’t get enough traction on the web, but will help you manage and grow your business. You signed up on my website. If you’d like to unsubscribe, just click here. No harm, no foul, I’d love to have you back sometime.
A few weeks ago, I called a client to make sure he’d remitted his payroll taxes for the month. He said he wasn’t going to. ‘Why should I pay my taxes if the government isn’t going to help me?’
He had a point. They’d botched the PPP and EIDL loans, let big businesses take the majority of the funding, and left him to suffer. But, he’d had tax problems in the past and I wanted to get straight to the point, so I told him: “You need to continue paying taxes because they’ll seize your bank account. Maybe not today, maybe not tomorrow, but eventually.”
I’m sure you’ve heard the commercials. “The IRS is the most dangerous collections agency in the world!” It’s just a scare tactic to convince people to call in. But, there is a grain of truth in there. The IRS, and many other tax agencies across the US and the world, have wide-sweeping authorities to collect back taxes (much wider than any private company). The IRS can collect unpaid taxes for up to 10 years, can place blanket liens on all your assets (simultaneously, destroying your credit score), and can seize assets without going to court. Many other tax agencies have the same authorities. Some have even harsher rules that allow for higher interest and more time to collect delinquent taxes.
If you need to choose which bills to pay, always pay your taxes (especially your payroll taxes). They’re the easiest loan to take because you aren’t immediately sent to collections and your ‘service’ isn’t shut off. But, they’re the hardest loan to repay because tax debt keeps growing while you’re doing business and, once you are sent to collections, tax agencies don’t pull their punches.
If you can’t pay your taxes, be proactive, speak to your accountant, and figure out the best way to get caught up. Tax agencies don’t want to send you to collections, seize your assets, then try to sell them for a fraction of what they’re worth. They just want their money and will work with you.
THIS WEEK’S ACTION ITEM: Pay your taxes. Yeah, this week’s action item is a bit of a cop-out, but it’s important. Digging your way out of tax debt is incredibly stressful.
Have a good weekend and stay safe!
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