Business owners who cannot pay their tax debt immediately upon request may be able to set up a payment plan through the IRS. An IRS payment plan allows taxpayers to pay their tax debt via regular monthly payments. The amount your business pays is based on how much your business owes and how much time you have to pay the debt before the IRS takes action. Consider applying for a payment plan to prevent your business from going into debt while paying the required amount in taxes.
You’ll need to discuss your options with a qualified IRS tax attorney to take advantage of an IRS payment plan. An attorney can examine your situation and determine the lowest monthly rate the IRS will accept. A lot is involved with payment plans, and you may not qualify for a payment plan without help from legal representation. These can be complicated and time-consuming matters to deal with, which is why hiring an attorney is crucial.
Does Your Business Qualify?
Every business’s tax situation is different, and this is what determines which payment plan options you qualify for. Businesses have two different payment plan options:
- Full payment – You pay the full amount when due.
- Long-term payment – Also known as an installment agreement, you pay a certain amount of money every month until the amount is paid off.
Paying a smaller amount at regular intervals can reduce stress in your business and avoid strict penalties for non-payment. Your business must file all returns to qualify for a long-term payment plan through the IRS and own $25,000 or less in combined penalties, tax, and interest. If you meet the criteria above, consider applying for an IRS payment plan.
What Your Business Needs to Apply
Before applying for a payment plan with the IRS, there are a few important items you’ll need. These include:
- Your employer identification number (EIN)
- Date your business was established.
- Your caller ID from the notice
You will need to provide additional information if you did not receive a balance notice from the IRS despite filing a tax return. This information includes:
- Balance due amount
- Tax form examined or filed.
- Tax period examined or filed.
- Business address from your most recently filed tax return.
When setting up the plan, you may be required to pay a setup fee of $31 per month if you select a long-term payment plan, in addition to accrued penalties and interest. If you choose to pay monthly without automatic withdrawals, the setup fee increases to $130. Should you wish to revise your plan, it costs $10 to complete the process.
Revising Your Payment Plan
The IRS allows your business to revise your payment plan at any point. Should you wish to adjust how much you pay monthly, you’ll need to access the IRS’s payment agreement page to change these details. For example, if you wish to switch to automatic withdrawal or change your bank information, you can do so online. However, your changes must meet certain requirements, as you still need to pay an adequate amount monthly. The IRS also assists businesses that are unable to revise their plan.
The following information can be changed when revising your plan:
- Monthly payment amount
- Monthly payment due date
- Bank routing and account number (through Direct Debit agreement)
- Current agreement to a Direct Debit agreement
- Reinstate after default
Managing your payment plan can be challenging, especially if circumstances. However, there are plenty of resources available online to help you make the best decisions possible.
Is an IRS Payment Plan Right for My Business?
Payment plans and installment agreements can provide many advantages to a business, but there are also drawbacks that businesses must consider.
For example, installment agreements allow businesses to pay a fraction of the total amount owed at a time. When this becomes more manageable, businesses can then opt to pay it all at once. This customizability can be attractive to businesses, as they can change their plan if circumstances change. Penalties are also reduced under a payment plan, which can save businesses money.
While the benefits can’t be overlooked, there are some disadvantages to IRS payment plans that businesses should at least keep in mind. In some cases, businesses may end up paying more than the original tax amount due to increased interest and penalties. Your interest rates could be as high as 10% per year, according to your installment agreement. Also, there are enrollment fees businesses must pay to qualify for the plan.
What if My Business Can’t Pay?
Call the IRS immediately if you’ve established an installment agreement with the IRS but can’t pay when required to. You may need to provide proof that your financial situation is preventing you from paying. One option you may consider is reducing your monthly payment to an amount you can manage.
When you cannot pay, you will still accrue interest and penalties. You may also be notified of a lien, which allows the government to make a claim on your business’s assets. If you don’t pay according to your plan and you don’t notify the IRS of this situation, your agreement could be terminated entirely.
Why Legal Representation is Necessary
If your business doesn’t qualify for an offer in compromise, your next best option is setting up a payment plan with the IRS. However, this can be challenging to set up on your own, even if you meet the specific requirements. For example, tax debt can be problematic for businesses, as this could cause businesses to close entirely. There are several tax relief options available, and an experienced tax attorney can help you navigate this process.
An experienced attorney can help with the following:
- Creating a payment plan that your business can manage while meeting the IRS’s requirements.
- Speak with the IRS about your tax-related concerns and work to find a solution.
- Provide advice related to these matters.
- Decide how best to make payments once the IRS approves your plan.
If your business is unsure if you qualify for a payment plan, speaking with an attorney ahead of time can ensure you understand your situation. If your circumstances have changed and you cannot pay your required amount, having legal representation on your side reduces the risk of your plan being terminated.
Delia Law Can Help
Consider reaching out to our team at Delia Law immediately if you believe your company or business qualifies for an installment agreement or IRS payment plan. We can help you apply for a payment plan and provide high-quality guidance throughout the process. We can also represent you in meetings with the IRS, and if necessary, we’ll submit requests to the IRS on your behalf. Should any legal matters arise regarding your payment plan or taxes, our team can evaluate your situation and work to achieve the best outcome possible.
Contact our team today for more information on how Delia Law can help your business.