How To Pay Off Past Due Business Taxes

Clip art of computers and tablets above the word "Payroll" with a money bag labeled "tax" at the bottomThe U.S. government gets most of its money from individual income taxes. However, businesses large and small also pay billions in excise, payroll, and other taxes. If these organizations fall behind on their tax payments, relief may be available in the form of an IRS business installment agreement.  Read on to find out how to pay off past due business taxes.

In many ways, so-called BMF (Business Master File) installment agreements work the same way as individual taxpayer plans. But the underlying obligation is different, as is the business owner’s obligations. So, IRS business installment agreements are a little different as well.

A Brief Overview

The Service has no obligation to offer IRS business installment agreements, or any other relief, to organizations that owe past-due taxes. Moreover, if the Service suspects that your marijuana dispensary or other business “pyramids” liabilities, the consequences are even worse. “Pyramiding” often refers to businesses that repeatedly fall behind on their tax payments, file bankruptcy, shut down, and reopen under different names. In these cases, the IRS may not even have to go to court and prove fraud to effectively shut the business down.

Trust fund payroll taxes (Form 941 or Form 943) are the most common type of business taxes. Combined with the employer’s share of Medicare and Social Security taxes, businesses hold payroll taxes “in trust” for the IRS. Excise taxes for certain goods or activities, such as diesel fuel or a large truck’s highway use, are much like state sales taxes. Technically, these obligations are trust fund taxes as well.

Types of IRS Business Installment Agreements

All these plans require financial sustainability. In other words, the business must be able to meet its current tax obligations and make payments on the past-due amount. If that’s not possible, your business must trim other expenses, such as payroll. The specific types are:

  • Business Trust Fund Installment Agreement: Operational businesses that owe less than $25,000 in unpaid payroll taxes have twenty-four months to pay the obligation. If the amount is more than $10,000, payment must be made through direct debit. Most businesses need not provide extensive financial information to qualify.
  • Streamlined Installment Agreement: This plan covers non-trust fund obligations, like Form 1120 corporate taxes. The amount must be under $25,000 and the repayment period be less than thirty-six months. Even closed businesses can qualify for a streamlined IRS business installment agreement.
  • Routine Monthly Payment Plan: If the business does not qualify for either of the above, the IRS might still accept partial payments. The business must file Form 433-D before the IRS will consider the request.
  • Partial Payment Installment Plan: Much like an individual Partial Payment Installment Agreement, the IRS accepts maximum monthly payments until the collection statute of limitations expires. If the taxpayer does not pay off the entire amount by then, the IRS writes off the remainder.

Pay close attention to the bottom of page one on the 433-D. If the agent checks the “PPIA BMF 2-year review” box, the IRS will essentially make the business re-qualify every two years. That process usually includes a higher monthly payment.

Other qualifications may apply as well. For example, the business must maintain a cushion of two quarterly tax payments to qualify for an IRS business installment agreement.

The IRS does not have to work with your business, but it does want its money. To take advantage of this dynamic and see if an IRS business installment agreement is right for you, contact an attorney today.

Contact an Experienced Tax Attorney

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Venar Ayar, Esq.

Venar Ayar, Esq.

Attorney-at-Law, Master of Laws in Taxation
Principal and founder, Ayar Law

Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.