At this time of year, we all feel the crunch that comes with the filing of our annual tax return. Unfortunately, several businesses are struggling to keep their doors open and when that belt starts to tighten, several owners make horrible decisions that hurt more than help. Initially, the worst thing to do is to not pay your taxes. That includes property, sales and income tax. Not only will Uncle Sam continue to pursue you personally long after your business is dissolved, you will get hit with interest and penalties and could even face criminal charges. The New York State Department of Taxation and Finance issued a press release two past weeks identifying twelve individuals that were arrested and charged with felonies for failing to file tax returns. Is that a risk you are willing to take?
Secondly, do not stop paying your employees. Employees are keenly aware of their rights and will not hesitate to file a claim with the Department of Labor. The record keeping requirements placed on owners is extensive and few operators maintain sufficient records. The penalties and interest for DOL violations are severe and the failure to pay these fines can result in personal liability. Lastly, do not stop payment on any contract which you personally guaranteed. It goes without saying that some businesses will fail but that does not mean that your personal credit score must also suffer. As practical advice, do not sign a personal guarantee that is not absolutely necessary and if you do, make sure payment of that agreement becomes a priority.