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The IRS Payment Plan Process For Unpaid Business Taxes

Here’s our guide to the IRS payment plan process for unpaid business taxes.

Unpaid Business Taxes

Generally, if you owe payroll taxes for an amount less than $25,000, you can request an installment agreement to full pay their tax liability within 24 months, provided that you are in filing compliance.  If you cannot afford to pay the full tax liability within 24 months, and/or you are not in filing compliance, and/or the amount of the payroll tax liability is more than $25,000, then you must request the case be transferred to the field and assigned to a Revenue Officer.

Once a Revenue Officer is assigned to the case, he or she will ask you whether or not you can fully pay the tax liability within 60-days or make a lump sum portion to pay the balance due below $25k. If you can’t commit to either of these options the Revenue Officer will file a Federal tax lien ( a tax lien, unfortunately, will have an adverse impact on your credit).

The IRS Payment Plan Process

The Revenue Officer will also request a completed Form 433B Collection Information Statement for Businesses along with supporting documentation. The Collection Information Statements will provide the IRS with your financial information; assets, equity, income, and expenses.  The IRS will then review this information to determine for themselves your ability to pay the back taxes, but will also use the information as levy sources; business bank accounts and accounts receivables.

If the business is no longer operating, the IRS Revenue Officer must place the account in currently non-collectible status.  However, before the Revenue Officer will place an account in currently non-collectible status, he or she will ask you questions pertaining to the business assets.  If there are business assets or open business bank accounts, the IRS will request that the assets are sold and the proceeds received from the sale be applied to the outstanding tax debt.  In addition, the IRS will issue a bank levy to attach to any funds in a business bank account.

Meanwhile, the Revenue Officer will initiate an investigation on whether to assess the trust fund portion of the tax liability against one or more individuals. The trust fund portion of the payroll tax is the amount of the total federal income tax withholdings of their employees, one-half of social security and one-half of Medicare that was withheld from their employees’ paychecks.  The employer holds these amounts “in trust” for their employees, so the IRS refers to the personal assessment of the employee’s federal income tax withholdings, one-half of social security and one-half of Medicare as the trust fund recovery penalty.

Unpaid Business Tax Liability

In order for the IRS to hold a person liable for payroll taxes, they must show that one or more individuals were “willful” and “responsible” for the failure to pay the payroll taxes. If this happens, then the IRS will place the business account in an installment agreement or place the account in currently non-collectible (generally if the business is closed), and can pursue collections against the individual(s) to collect on some or all of the unpaid payroll tax.

If you have unpaid payroll taxes you can essentially have two installment agreements with the IRS to pay down the same tax liability because the IRS has two sources (business and personal) to collect from.  The problem, however, is that the IRS charges interest twice, (1) interest on the unpaid payroll taxes, and (2) interest on the amount that was personally assessed against the individual(s). If multiple individuals are assessed, the IRS will only collect the amount once, but from whichever taxpayer can pay first.

Contact Ayar Law To Resolve Your Tax Problems

If you need help dealing with unpaid business taxes contact Ayar Law today at (248) 262-3400 for a free, no-obligation consultation.

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.

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