It's January 15, so therefore I must be getting tax payments out the door.
For once, all the calculations are finished, and I just have to transfer them to the state sales tax paperwork (not due for a few days yet, but as long as I'm at it...) and cut a check to the IRS for quarterly taxes.
I take taxes seriously, which is why I've been so flummoxed over some anonymous poster (not saying where I saw this) that tax liens are a business plan. You read that right. The idea is to hold onto the cash and invest it because the interest will far outweigh what you owe the tax man.Well, I don't know about where the troll lives, but if my property taxes are six months overdue, I get hit with a 33% in interest and penalties. Granted, the interest is only 6%, but it's the penalties that make you sit up and take notice and say, "maybe I ought to pay that sucker or make some kind of payment agreement."
I don't even want to think about what would happen if I owed the IRS.
(Standard disclaimer: I'm not a lawyer or an accountant, and I don't play one on TV. But I do know not to mess with the tax man.)
Which is why I can't understand the idea of a keeping a tax lien on my company as a solid business plan. Investments are a risky business, and the higher the potential return, the higher the risk. What would get me over 33% in six months?
Also, a tax lien would get on my credit report, making it difficult for me to get credit should I need it. A line of credit is a good thing, even if you never use it. Emergencies happen. What if one of my clients doesn't pay up and I have bills due? I'm a sole proprietor, but what if I had employees? I can't not pay them because a client didn't pay up. I'd be in a whole heap o' trouble.
Tell me again how this is a good thing for my business?
As a contractor and an author, here's the other side of the proverbial coin: People like me like to get paid, just like people working for da man like to get their paychecks on time. If a business I'm contracting to or a publisher that owes me royalties goes under, I and my fellow contractors/authors are at the bottom of the pile. Our debts are unsecured, and the court will think about sending us a pittance when the other, secured debts are discharged. Maybe a group of unsecured creditors with clout and good lawyers can negotiate a reduced payment. The tax man is right up there with the secured creditors because he has a lien on property or other assets. I know this because a company I was contracting to filed for bankruptcy and I was owed for a couple of invoices. It was a long and nasty mess, but it could have been worse.
One thing the anonymous poster had right (sort of) is that liens are sometimes part of doing business. Or maybe I should say the threat of liens. If you've bought a house or financed a car or capital equipment for your business, you probably agreed that the lender can place a lien on the property you secured for the loan if you don't pay up. Of course, if you make your payments on time, it can help your credit rating. If you don't, it hurts your credit rating. it's that simple.
Again, I'm not a lawyer or an accountant. And if you have reason to show that having a tax lien on your property is a good business plan, then please show me your credentials and tell me exactly how that works. I'm open to novel ways of keeping my money, just not illegal or terribly risky ones.
And now, I'd better go finish my taxes so I can get them off in the mail.