Business IRS Payment Plan

Your business owes back taxes.  This may include corporation or payroll taxes.  The business is unable to pay back the taxes in full, but you could pay back the taxes over time.  The IRS may agree to a Business IRS Payment Plan.

If the business can’t afford the Business IRS Payment Plan then you should review IRS Tax Settlement and IRS Hardship.

Please note: An Business IRS Payment Plan will not stop penalties and interest.  Penalties and Interest will continue to accrue.

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IRS Payment Plan Step 1 – Compliance

The business must be “compliant” before you can set up a Business IRS Payment Plan.  What does “compliant” mean?  All business tax returns must be filed.  This includes corporation and payroll tax returns.  At least the last 2 quarters of business taxes must be paid in full.

Example: You would like to set up a Business IRS Payment Plan in the 3rd quarter for payroll taxes.  All payroll tax returns must be filed.  All taxes must be paid for the 1st and 2nd quarters.  The IRS will not accept a Business IRS Payment Plan unless the business is “compliant” for the last 2 quarters.

IRS Payment Plan Step 2 – Types of Business Taxes

All business taxes can be included in the Business IRS Payment Plan.  It is important to understand the main business tax types.  You will want to include all the business tax types in the Business IRS Payment Plan.

Form 941, Employer’s Quarterly Federal Tax Return.  Reports payroll taxes quarterly

Form 944, Employer’s Annual Federal Tax Return.  Reports payroll taxes annually

Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return.  For federal unemployment taxes

Form 1120, U.S. Corporation Income Tax Return.  For C Corporations income taxes

Form 1120S, U.S. Corporation Income Tax Return for an S Corporation.  You may get a tax penalty for filing an S Corporation tax return late.

IRS Payment Plan Step 3 – Pick the Plan

Option 1: Streamlined Business IRS Payment Plan

  • Business owes less than $50,000
  • Available for C Corporation tax, S Corporation tax, and Closed Businesses with payroll tax problems
  • Not available to Open Businesses with payroll back taxes

You can request to pay back the IRS in 6 years.  If the tax balance is less than $25,000, then you do not need to provide the IRS business financial information.  If the tax balance is between $25,000 and $50,000, then you do need to provide the IRS business financial information and the payments must be automatically taken out of the business bank account.  IRS will ask you to fill out Form 433B for business information and Form 433D to set up automatic payments.

Option 2: In-Business Trust Fund Express Business IRS Payment Plan

  • Business owes less than $25,000 of payroll taxes
  • Available to Open Businesses with payroll back taxes

You can request to pay back the IRS in 2 years.  You do not need to provide the IRS with business financial information.  If the tax balance is between $10,000 and $25,000, then payments must be automatically taken out of the business bank account. Use Form 433D to set up automatic payments.

Option 3:  Regular Routine Business IRS Payment Plan

  • Business owes more than $50,000
  • Available for C Corporation tax, S Corporation tax, and Closed Businesses with payroll tax problems
  • Not available to Open Businesses with payroll back taxes

The IRS will request business financial information.  Your monthly payment amount will depend on how much the IRS thinks the business can afford.  For example, the business owes $350,000.  The IRS determines you can afford to pay $8,000 per month.  IRS will agree to a Business IRS Payment Plan for no lower than $8,000 per month.  If you are unable to afford $8,000 per month payments, you may need help negotiating with the IRS.  IRS will ask you to fill out Form 433B.

Option 4: Partial Business IRS Payment Plan

  • Any amount of taxes owed
  • Available for all types of business back taxes

The IRS will request business financial information.  The IRS will determine the payments you can afford.  For example, the business owes $125,000.  The IRS determines you can afford $900 per month payments.  IRS will agree to a Partial Business IRS Payment Plan for no lower than $900 per month.  If you are unable to afford $900 per month payments, you may need help negotiating with the IRS.  IRS will ask you to fill out Form 433B.

Please note: If you are unable to afford a Partial Business IRS Payment Plan, then consider an IRS Tax Settlement (Offer in Compromise). An IRS Tax Settlement may be more difficult to get if the business is still operating.  Review this option with an experienced tax professional.