Small businesses can owe big back taxes and be unable to afford repaying them because of mismanaged accounts and federal duties. Some owners may have relied on themselves for their accounting and tax filing tasks to save dollars only to end up with erroneous computations and get penalized as a result. Others who go into bankruptcy consider their tax debts the least of their priorities.
Whatever the case may be, having an IRS tax lien placed on a business can spell dire consequences. This can be a “double jeopardy” situation for a small business owner who can suffer both a poorer business credit standing and a lower personal credit score.
Normally, this won’t happen to limited liability companies (LLCs) that are considered independent legal entities. However, if you use your personal credit to guarantee or secure your business funding or an extension of it, and if the IRS suspects fraud or the mixing of personal and business reports at the expense of back taxes, your personal credit rating can take a hit.
The reverse scenario is possible, where the tax lien is on your personal assets and your poor credit score affects your business in turn. If your business is structured as a “sole proprietorship,” lenders can also look into your personal credit history alongside your company’s to assess your risk profile. This can make it difficult to get approvals for good loan terms. Seek to eliminate the lien with the help of an experienced IRS lawyer immediately.