Here’s what you need to know about the Business IRS Payment Plans.
Notice of Deficiency
Before you start down the path to choosing and applying for a business IRS payment plan, the agency will send you a notice of deficiency. If you don’t think the IRS has determined your tax responsibility correctly, you can petition the US Tax Court within 9- days of the notice’s original date to dispute the charges.
There are several different types of notices of deficiency, all of which denote a discrepancy in what you think your business owes in taxes (reported on your tax returns) versus what the IRS has calculated as your tax responsibility.
Once you’ve determined the notice of deficiency is legitimate and accurate, it might be time to set up a payment plan in order to divvy out what you owe without having to pay it all in one lump sum.
What is an IRS Payment Plan?
The Business IRS Payment Plans are tax payment plans that help businesses pay their back taxes. It doesn’t stop penalties and interest charges, but you can qualify to apply online if you are looking for a long-term payment plan. You just need to have filed all your required returns and owe $25,000 or less in combined taxes, penalties, and interest, according to the IRS.
The only difference would be if your business is a sole proprietorship or you are an independent contractor, in which case you will need to apply for the tax payment plan as an individual.
What Does It Cost?
If you choose the long-term payment plan, most often called an “installment agreement,” there is a $31 online setup fee (set up via phone or other methods may have higher associated fees and then you will pay monthly via DDIA (Direct Debit Installment Agreement) automatic withdrawals from the business checking account that you provide.
You can also go the non-direct debit route. It costs $130 to set up and then you can pay your monthly bill through a variety of means, including paying electronically (online), by phone, check, money order, debit, or credit card, or through the EFTPS, Electronic Federal Tax Payment System.
Businesses with balances equaling more than $10,000 must be paid by Direct Debit.
Here are some more IRS resources and additional information on the payment plans they offer.
For the short-term plan, you must pay back what you owe in 120 days or less. You can be eligible for this plan if you owe equal to or less than $100,000. And there are even more options for payment plans, as we’ll mention below.
Streamlined vs. Installment Agreement
If the abovementioned routes aren’t the most appealing, businesses can choose to enroll in the Installment Agreement or the Streamlined Installment Agreement
These agreements are similar, but not identical. With the Streamlined Installment Agreement, your business can qualify if you agree to payments that will get rid of your debt in full in 6 years or less. But your business must owe less than $25,000.
You can also use this plan if your business closed during the last tax year but still owes outstanding taxes.
The Installment Agreement is for businesses with tax debts of more than $25,000 because any debts that large are ineligible for the streamlined payment plan.
This is still a monthly payment plan, but to qualify, the IRS requires a full analysis of your business from a financial perspective. This includes a Collection Information Statement (Form 433-B) with all supporting documents as well.
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