Don’t panic. You have options.
What To Do When You Realize You Can’t Pay Your Business Taxes
First, don’t panic. This happens to many business owners.
Second, be sure to file on time, even if you can’t afford to pay in full at that time.
Next, review your options. Understand that no matter how you proceed, your debt will accrue interest until you pay the IRS in full. And the IRS will not waive interest charges. Double-check your books to see if you can pay the IRS in full before moving forward with payment options.
Then, be sure to respond to the IRS’s notice within 30 days of receiving it. This means collecting all of your business’s financial information, including pay stubs, rental or lease agreements, mortgage statements, lease and loan documents, and utilities documents. Call the IRS at 800-829-4933 for assistance. The IRS can help you determine the best payment option for you based on your current circumstances.
You Have 4 Options if You Can’t Pay Your Business Taxes On Time
- Full Payment Agreement
- Installment Agreement
- Offer in Compromise or Partial Payment Installment Agreement
- Temporarily Delay Collection
A Full Payment Agreement provides you with additional time to pay your business taxes in full. The timeframe is up to 120 days.
An Installment Agreement is a monthly payment plan. You can discuss your needs with the IRS about payment options and set up a payment plan with them. A monthly payment plan may work well with your monthly budget if you cannot pay in full within 120 days.
An Offer in Compromise is when you and the IRS create an agreement that determines a reduced payment amount to resolve your tax liability. You are essentially compromising on the debt amount. The IRS will only consider an Offer in Compromise if you are up-to-date on all tax filing and all other tax payments, including quarterly taxes.
A Partial Payment Installment Agreement lies somewhere between an Installment Agreement and an Offer in Compromise. You pay part of your owed taxes over time according to an agreement you make with the IRS.
Temporary Delay Collection happens when the IRS determines that you can’t pay your tax debt because of financial hardship. In this scenario, the IRS temporarily delays collection by marking your account as “not collectible.” However, penalties and interest continue to accrue until you pay in full.
Learn more about these payment options from the IRS at this link.
Tips to Lower Penalties When You Can’t Pay Your Business Taxes On Time
- File by the deadline, even if you can’t afford to pay on time. Penalties for not filing are way worse than penalties for not paying.
- Respond to the IRS notice right away, at least within 30 days to avoid going into collections. Or, better yet, anticipate that you won’t be able to pay and reach out to the IRS first.
- Pay as much as you can afford by the tax deadline to lower penalties and interest. After all, interest only accrues on unpaid taxes.
- Communicate early on with the IRS to let them know about your situation.
- Continue to keep in contact with the IRS to inform them of the status of the payment situation. This can help you avoid costly investigations.
We can’t help you pay your federal business taxes, but we can help you save money. Save money on your business’s tax expenses by e-filing 1099, 1098, W-2, and ACA forms with eFile360. Learn more at this link.