When you’re running a business, it’s pretty easy to convince yourself that you’ll get to your taxes tomorrow. Or the next day. Or after you’ve done the 43 other things that are demanding your attention.
But while you’re busy avoiding your taxes, they’re busy getting more expensive. Wait long enough, and the IRS can go after your business’s money and property – and in some cases, your personal assets.
The price of waiting it out
“I’ll do it tomorrow” is a great strategy for cleaning out the office fridge. But for your taxes? Not so much.
The IRS can penalize you for filing late and paying late. Meanwhile, interest has also snuck into the chat, adding even more to your tab. Being late with your taxes comes at a steep price.
Exactly how steep? While penalties vary by legal status, let’s look at a quick example. For a 2025 partnership return, the late filing penalty is $255 per partner for every month (or partial month) that it’s late. Suddenly, doing your taxes moves up higher on the priority list.
The big takeaway here is that if you can’t afford to pay, file anyway. Filing and paying are two completely different obligations, so skipping the return only adds to your list of problems. And if you got an extension? You have more time to file, but your payment was due in April.
The IRS has ways of getting your attention
A tax bill that never seems to stop growing is one thing, but it can get a lot more uncomfortable once the IRS starts looking for other ways to collect. (And trust us, it will come to collect.)
Failing to meet your tax obligations can put your business’s property, bank accounts, and even money owed by your customers in the line of fire.
Penalties and interest can hurt your wallet. What happens next can hurt your business.
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First comes the lien
If the term “federal tax lien” has you picturing the IRS changing the locks on your business, you’re in luck because we’re not there yet.
Think of a lien as the federal government calling dibs on your property. This gives them a legal claim against property you already own, property you acquire later, and even accounts receivable.
While the IRS isn’t hauling away your office furniture and laptops, a filed Notice of Federal Tax Lien can make it harder to get credit. Turns out, lenders aren’t exactly thrilled to find out they’ll have to get in line behind the IRS.
Then comes the levy
Unfortunately, the lien is just the IRS getting warmed up. If your tax debt stays unresolved, things can escalate. Introducing the levy.
A levy is when the IRS can actually start taking property to cover your tax debt. This can include money from your business bank account, certain business property, and payments that your customers owe you. Needless to say, it’s a little hard to keep everything business as usual when the IRS starts dipping into your cash flow.
The bad news is that a levy is very serious. The good news – relatively speaking – is that it doesn’t happen overnight. The IRS has to assess the tax, send you a bill, and issue a Notice of Intent to Levy at least 30 days before it can start collecting.
In other words, the IRS gives you plenty of chances to deal with the problem before it gets this far, so take one of them.
Here’s where things get personal
So far, you should have an idea of what the IRS can do to your business. But if payroll taxes are part of the problem, the line between business and personal starts getting blurry.
When you withhold federal income tax, Social Security, and Medicare taxes from your employees’ paychecks, the money isn’t yours to hang onto until you’re ready to pay up. These are called trust fund taxes, and it’s just a fancy way of the IRS saying, “We’re trusting you to send us this money.” Break that trust, and things get a lot more personal.
That’s where the Trust Fund Recovery Penalty (TFRP) can make a bad situation even worse. The IRS can assess it against anyone who was responsible for handling those taxes and willfully didn’t pay them. And that doesn’t just mean the owner. Officers, partners, shareholders, or others with control over company funds can find themselves on the hook.
And don’t think that “willfully” means you set out to cheat the IRS. If you know taxes are due but use the funds to pay other business expenses, that counts, too.
Once the TFRP is assessed, everything ramps up. Liens and levies aren’t just a business problem anymore – your personal assets could be on the line.
Ignoring the IRS is a lot like that mystery container in the office fridge you still haven’t cleaned out. The longer you ignore it, the worse things get. So, file your missing returns, figure out what you owe, and start working with the IRS to clean up the mess.
