When it comes to running a business, managing taxes is a big part of your job. Taxes for businesses are more complicated than individuals, particularly when your business involves what the government refers to as "taxable events." These taxable events are more than just regular income, though they do include that. And as soon as those events occur, you receive tax liability.

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What Is Tax Liability?

Tax liability is just the legal term that means you owe money to the government because your business completed a taxable event. The most common event is fiscal year-end taxes, but other common scenarios where tax liability occurs include:

  • Inheritances
  • Stock or asset sales
  • Royalty income
  • Business mergers that result in an increase in profits

Your tax liability results in the government having a legal claim on your assets. In some cases, those assets are nothing more than your business bank account, while in others they might be attached to particular pieces of property. 

What Happens If I Don’t Pay My Taxes?

When you fail to pay the taxes within the time required, the government can then foreclose the account, seize assets, establish a lien, or otherwise place legal burdens on your assets or accounts. The only way to remove it is to pay the liability off, unless you can demonstrate that you never owed the money to begin with. If you are running a business as an individual and not as a corporation or an LLC, the government cannot tax or seize more than 55 percent of your income. If you are running a corporation or an LLC, the government must limit this seizure to business accounts and property, meaning that your personal assets are safe. Remember that when it comes to tax liability, the government doesn't have to go through the same legal process as an average business or creditor. They just have to give you notice that they are taking action against you, particularly if the action is limited to a lien or a wage garnishment on your bank accounts.

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