As a business owner in Minnesota, you may find that it is all too easy to fall behind on paying your business taxes, leaving you with an outstanding balance that you have to take care of.
The first step toward repayment of your outstanding tax balances may be filing a financial statement with the Minnesota Department of Revenue. Along with supporting documentation, MDR uses this information to evaluate your ability to pay back your debt. After MDR makes its determination, there may be repayment options available to you, such as the following.
Payment agreements
Both the state Department of Revenue and the Internal Revenue Service may be willing to make an arrangement by which you agree to pay back what you owe a little bit at a time, usually on a monthly basis. Fees, interest and penalties may apply. It is important to hold up your end of the agreement by paying each tax notice on time.
Bankruptcy
Depending on the type of bankruptcy you file and the taxes you owe, filing for bankruptcy may allow you to discharge tax debt or reorganize your debt so that it becomes part of a larger repayment plan.
Compromise
If you file for bankruptcy, it may discharge your tax debt so that the IRS or MDR end up getting nothing from you. It is more beneficial for them to receive a portion of what you owe. Therefore, they may be open to an offer in compromise, in which you propose, in writing, to pay a tax settlement that is less than the full amount.
Financial hardship
If you are able to demonstrate financial hardship, the MDR may reconsider enforced collection actions against you. As a business owner, you can demonstrate financial hardship in the form of payroll checks that you cannot honor. You can provide your business information by filling out Form C58B, available from the MDR.
