Installment Agreements for Businesses

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Written By Attorney Michelle Wynn on 2/21/17
If your business owes money to the IRS, one method of resolving the tax balance due is to request a payment plan. This is the method most favored by the IRS… well, second to payment in full immediately.

An IRS monthly payment plan is called an “Installment Agreement.” An Installment Agreement with the IRS means that the business pays a certain amount of money each month to put towards its tax liability. While you are making these payments, interest will continue to accrue as will late payment penalties. The IRS will also keep any income tax refunds that are due to the business until the liability is paid in full.

You may want to review the information in the “ business taxes ” section of the website to learn more about what types of taxes business may owe.

If the business is still operating, the IRS will only allow an in-business installment agreement if the business is able to keep up with its current expenses, current taxes, and can make payments towards its past due taxes. If the business cannot afford to pay anything towards its back taxes because it requires all available resources to pay towards its current expenses and current taxes, the IRS may take enforced collection and essentially force the business to close down. Sometimes it is best to reduce current expenses or the items giving rise to current tax expenses (such as reducing payroll) in order to avoid such a catastrophic result.

A tax lawyer experienced in addressing business tax debts can help you
identify when you are at risk of having the IRS shut down your business and help you take steps to avoid it.

There are different types of business installment agreements with the IRS, but some requirements are true for all of them:

You must have filed all required tax returns for the business.
You must be current on all required tax deposits for the current tax period (and often for multiple past tax periods).

Having an experienced tax attorney can help you know what option is best for you to resolve your business tax debt, taking into account all of your company’s goals and financial constraints. Using a tax lawyer can also help you navigate often complicated rules and IRS procedures to help you not only recover from the tax problem but also help your business continue to grow.

The available types of Installment Agreements are:

In-Business Trust Fund Express Installment Agreement

An In-Business Trust Fund Express Installment Agreement is available to small businesses that owe back payroll taxes (IRS Form 940 , Form 941 , or Form 943 ) and still have employees. The amount of payroll taxes owed must be $25,000 or less. If the business owes more than $25,000, the business would need to consider a different type of payment plan.

The business must agree to monthly payments that are sufficient to pay the liability in full within 24 months or prior to the expiration of the time the IRS has to collect the debt (referred to as the CSED, meaning “Collection Statute Expiration Date”). If the business owes between $10,000 and $25,000, it also must agree to make these payments through debits directly from its bank account (called a Direct Debit Installment Agreement or “DDIA” for short).

Typically, if a business qualifies for this type of payment plan, it will not have to provide any financial information to get the IRS to approve the payment plan.




Streamlined Installment Agreement

Businesses can also qualify for Streamlined Installment Agreements similar to individual Streamlined Installment Agreements in certain circumstances. The business must agree to payments that will fully pay the liability over 6 years or prior to the expiration of the time the IRS has to collect the debt (referred to as the CSED, meaning “Collection Statute Expiration Date”).

If your business is still open, it can only qualify for a Streamlined Installment Agreement if it owes Form 1120 (U.S. Corporation Income Tax) income taxes or penalties, Form 1120-S (U.S. Income Tax for an S-Corporation) late filing penalty or income taxes, or Form 1065 (U.S. Return of Partnership Income) late filing penalties. The business must owe less than $25,000.

If your business is closed and still needs to enter into a payment plan, it can qualify for a business Streamlined Installment Agreement if it owes any types of business taxes and owes less than $25,000.

The IRS will not typically require a Collection Information Statement ( Form 433-B ) if the business qualifies for and requests a business Streamlined Installment Agreement. If the business qualifies, typically the IRS will not file a tax lien, but it does have the power to do so.





Installment Agreement

If your business has tax debts of over $25,000, cannot afford a Streamlined Installment Agreement, or does not qualify for a Streamlined Installment Agreement, the IRS can still approve a monthly payment plan for the business. However, the IRS will require a full financial analysis of the business, including a Collection Information Statement ( Form 433-B ) and all required supporting documents before it will consider accepting a monthly payment plan proposal.

If the business owes payroll taxes (IRS Form 940 , Form 941 , or Form 943 ) or excise taxes (IRS Form 720 , Form 2290 , or Form 730 ) or any other tax that is treated as being paid to the business and then paid from the business to the IRS, the IRS will need to assign a Revenue Officer to consider the business payment plan proposal. Before entering into any payment plan, the Revenue Officer will need to determine whether it should assess some or all of the “trust fund” taxes (see more information on “trust fund” taxes here) to any of the business owners or managers.

Based on the financial analysis, you can often reach a monthly payment plan that the IRS believes you can afford. If you cannot afford this amount, you may need to consider whether your business qualifies for an Offer in Compromise .


Click Here To Schedule A Free Consult To See If You Qualify
Click Here To Schedule A Free Consult To See If You Qualify
Click Here To Schedule A Free Consult To See If You Qualify