If your business owes the IRS back taxes, trying to resolve your tax debt can feel overwhelming. After all, the IRS is a powerful agency with formidable clout. That said, the IRS is easier to work with than you probably think. Depending on your financial situation, the agency provides several ways to pay your debt. As long as the IRS knows you’re making an effort, you have some flexibility in the way you pay off your back taxes.
Pay Your Debt
If you have the money, the easiest way to deal with tax debt is simply to pay it. The IRS won’t put you in jail or shut down your business as further punishment. The agency will simply deposit your money, and you can start fresh.
Try to Get Penalties and Fees Reduced
Tax debt quickly accumulates fees and penalties. However, if you’ve never owed back taxes before, the IRS may reduce them or waive them altogether. Call and explain that you are preparing to pay your back taxes, and ask for a penalty abatement. The agency is often willing to help out first-time offenders.
Ask for an In-Business Trust Fund Express Installment Agreement
If you owe $25,000 or less and can pay what you owe within 24 months, ask for an installment agreement. As the name suggests, this plan allows you to pay off your debt in installments. It’s easy to apply; simply go online and fill out an individual payment plan request.
If you owe between $10,000 and $25,000, the IRS will require you to enroll in a Direct Debit installment agreement where your payments are automatically debited from your bank account each month. This will help you avoid late fees.
Apply for an Offer in Compromise
If you can’t pay the full amount, see if you qualify for an Offer in Compromise. This is an agreement that lets you pay less than the total amount you owe. The amount you’ll save depends on the amount your business can afford to pay. After you submit your offer, the IRS will review your financial information, including your income, expenses, assets, and liabilities, and it will decide whether to accept it.
Avoid the struggle of trying to accomplish this on your own and hire a professional to help you determine a good offer, submit it to the agency, and negotiate on your behalf for the best outcome possible.
If your business owes back taxes, you have options. As long as you’re willing and able to work on paying what you owe, the IRS will usually grant you a little flexibility. Whether you need a few extra months to make your payments or your debt settled for less than you owe, take action now.
As soon as the IRS sees you are making a good-faith effort to pay, the agency will give you a little breathing room. This means you can put all your energy into growing your business, so you can make a profit and work hard to never owe back taxes again.