Back Taxes Help · IRS Tax Debt · Los Angeles, CA
You owe back taxes.Now what?Let's figure it out together.
Back taxes don't go away on their own — but they are almost always resolvable. APX helps Los Angeles small business owners understand exactly what they owe, what their options are, and how to move forward without making the situation worse.
Bilingual — English & Spanish · Serving LA businesses doing $400K–$12M/year
Understanding the problem
"Back taxes" means different things
depending on which agency is involved.
In California, a small business can owe back taxes to up to four separate agencies at the same time — each with its own rules, deadlines, and consequences. Knowing which agency you're dealing with determines what your options are.
The IRS is the most common source of back tax debt for small businesses. Unpaid income tax, missed quarterly estimated payments, and payroll tax delinquencies are the three most frequent issues. The IRS offers payment plans, penalty abatements, and in some cases an Offer in Compromise — but you need to know what to ask for and how to document your situation.
The California Franchise Tax Board collects state income tax and the $800 annual minimum franchise tax that every LLC owes — even if the business made no money. FTB back taxes often accumulate quietly when a business owner doesn't realize they owe California taxes on income earned partly outside the state, or when quarterly estimates are missed.
The California Department of Tax and Fee Administration handles sales tax — which is one of the most common audit triggers for restaurants, retail shops, and auto businesses. CDTFA back taxes often result from under-reported sales, missed deposits, or industry-specific tax rules the business owner wasn't aware of. Assessments can go back 3–4 years.
The Employment Development Department handles California payroll taxes and unemployment insurance. EDD back taxes are especially common in businesses that classified workers as independent contractors when California's AB 5 law requires them to be treated as employees. These assessments can include years of back payroll taxes plus significant penalties.
A scenario we see often
The letter arrives. The business owner panics.
Then they call us.
A restaurant owner in Inglewood received an IRS notice saying they owed $47,000 in back payroll taxes from 2022 and 2023. Their accountant had filed the returns, but the deposits hadn't been made consistently — and the penalties had been accumulating for 18 months.
When they came to APX, the first thing we did was pull the actual account transcript from the IRS to verify what was actually owed versus what was penalties and interest. The underlying tax was $31,000 — the rest was penalties that could be challenged. With organized books and a clear payment history, we helped them request a penalty abatement and set up an installment agreement at a manageable monthly amount.
What made the difference
- ✓ Knowing the difference between tax owed and penalties — they're negotiated separately
- ✓ Having clean, current books in Xero to demonstrate financial position
- ✓ Understanding that the IRS prefers payment plans over collection actions
- ✓ Acting quickly — delays add interest and reduce negotiating options
- ✓ Not responding to the notice alone without understanding all the options first
Your options
Back taxes are resolvable.
Here's how the IRS and California agencies typically work.
Every situation is different. These are the most common resolution paths — which one applies to you depends on what you owe, to which agency, and your current financial position.
The most common resolution. The IRS and FTB both offer payment plans that let you pay back taxes in monthly installments. The amount depends on what you owe and your demonstrated ability to pay. Interest continues to accrue, but collection actions stop.
Best for: Businesses with steady cash flow that need time to pay
If you have a clean compliance history or can demonstrate reasonable cause for missing payments, the IRS and FTB may remove some or all of the penalties — which can represent 20–25% of the total amount owed. This requires a formal written request with supporting documentation.
Best for: First-time issues or businesses with documented hardship
In some cases, the IRS will accept a lump-sum payment for less than the full amount owed if the business can demonstrate that full payment would create financial hardship. Qualification is strict — but for eligible businesses, it can significantly reduce the total liability.
Best for: Businesses facing genuine financial hardship with limited assets
If a business cannot pay anything right now without being unable to meet basic operating expenses, the IRS can place the account in 'Currently Not Collectible' status. Collection actions stop, though interest and penalties continue. This is a temporary status reviewed periodically.
Best for: Businesses in acute financial distress
If the back tax liability resulted from errors in the original return — missed deductions, misclassified expenses, or incorrect income reporting — filing an amended return can reduce the amount owed. This requires clean, accurate books to support the corrections.
Best for: Businesses where the original return had errors
If the IRS assessed additional taxes after an audit and you have documentation that wasn't considered, you can request audit reconsideration. This is not an appeal — it's a request for the IRS to review new information. Organized books are essential.
Best for: Businesses with documentation that contradicts the assessment
Important: APX is a business advisory firm, not a tax attorney or enrolled agent. For complex IRS negotiations, formal tax court proceedings, or Offer in Compromise submissions, we coordinate with and refer to qualified tax professionals. Our role is to organize your financial position, provide clarity, and ensure you approach any resolution with accurate books and a clear picture of your situation.
How APX helps
We don't just explain the problem.
We work through it with you.
Understand What You Actually Owe
We pull the IRS or FTB account transcript to verify the exact balance — separating tax owed from penalties and interest. Many business owners are surprised to find the underlying tax is significantly less than the total notice amount.
Organize the Books
Most back tax problems are made worse by disorganized records. We clean up and reconcile your books in Xero so any response to a tax agency is backed by accurate, defensible numbers — not guesses.
Coordinate with Your Tax Professional
APX works alongside your CPA or enrolled agent — not against them. We provide the financial clarity they need to negotiate effectively, request penalty abatements, or prepare amended returns.
Build a Prevention Plan
Once the immediate issue is resolved, we put systems in place — deposit schedules, quarterly tax reviews, compliance calendars — so back taxes don't accumulate again.
Who we help
Back tax issues are especially common
in these Los Angeles industries.
Sales tax under-reporting, payroll tax delinquencies, tip income reporting, CDTFA audits
High-volume cash and card transactions make restaurants one of the most frequently audited business types by CDTFA.
Parts vs. labor sales tax classification, worker misclassification (EDD), payroll tax issues
California has specific sales tax rules for auto repair that many shop owners don't know about — creating unintentional back tax liability.
Worker classification under AB 5, payroll tax delinquencies, subcontractor 1099 issues
The construction industry is one of the highest-risk sectors for EDD audits related to worker misclassification.
Federal excise tax, IFTA fuel tax compliance, payroll tax for drivers
Trucking companies face both federal and state tax obligations that are easy to fall behind on during periods of rapid growth.
Sales tax on taxable vs. exempt items, EBT/SNAP compliance, inventory reporting
The line between taxable and exempt grocery items in California is complex — and CDTFA audits in this sector are common.
Passive income reporting, depreciation recapture, California nonresident withholding
Investors who own California property but live elsewhere often have unresolved FTB back tax issues from prior years.
Questions we hear most often
What business owners ask us
when they owe back taxes.
Can I go to jail for owing back taxes?
Owing back taxes is a civil matter, not a criminal one — as long as you filed your returns. Criminal charges only apply to tax fraud (intentionally hiding income or filing false returns). If you owe money but filed honestly, the IRS and California agencies want to collect what's owed, not prosecute you. The key is to respond to notices and not ignore them.
What happens if I ignore the IRS notice?
Ignoring a notice is the worst thing you can do. The IRS will escalate — from notices to liens, levies, and wage garnishments. Each step adds penalties and interest and reduces your negotiating options. Most IRS issues are resolvable early. The longer you wait, the more limited your options become.
Can I negotiate my back taxes down?
Yes — but it depends on the situation. Penalties are often negotiable, especially if you have a clean prior compliance history or can demonstrate reasonable cause. The underlying tax is harder to reduce, but an Offer in Compromise may be available if full payment would create genuine financial hardship. The first step is understanding exactly what you owe and to which agency.
My accountant filed my taxes — how do I have back taxes?
Filing a return and paying the tax are two different things. Your accountant may have filed correctly, but if the payment wasn't made — or if quarterly estimated payments were missed — the balance accumulates. It's also possible the return had errors that resulted in an underpayment. A second opinion on prior returns often reveals the source of the problem.
How far back can the IRS or FTB go?
The IRS generally has 3 years from the filing date to audit a return, and 10 years to collect assessed taxes. California's FTB has a 4-year standard lookback period for audits. If fraud is suspected, there is no statute of limitations. For most small businesses, the practical concern is the last 3–4 years.
Why APX gets involved in this
We're Here To Help.
APX is built around one idea — help small businesses in Los Angeles grow stronger and become more resilient.
A back tax problem doesn't have to end a business. In most cases, it's resolvable — but only if you understand what you're dealing with and approach it with organized, accurate financial records. That's where we come in.
Know a business owner dealing with back taxes?