Does your business owe taxes that it can’t pay?

Have you recently received correspondence from the IRS indicating that your business owes past taxes? If you have found yourself in a situation where your business is not able to pay the balance in full, you will need to establish resolution on the balances.

Much like individual income taxes, the IRS offers various resolution options for businesses. In some situations, the business may be able to request an In Business Trust Fund Express Installment Agreement. This agreement allows the business to pay its tax debt in full over 24 months.

If a business cannot make this payment or otherwise does not qualify for this agreement, it will need to complete a form 433-B, Collection Information Statement for Businesses. The form 433-B provides the IRS with a comprehensive view of business income, expense, assets, and liabilities in order to better determine the businesses ability to pay.

When completing a form 433-B, you will need the following information: the basic information for the business (address, EIN, entity type); information regarding officers/members; bank account information; receivables and liability accounts; asset information including real property, vehicles; and equipment owned by the business; and monthly income and expenses of the business.

Although completion of a 433-B may seem rather straight forward, there are issues that you need to be aware of when completing the form. For instance, a seasonal business needs to determine what monthly income to report, as there may be large fluctuations from month to month. Also, a business that just received a large payment may show excess money in the business bank account, although that money may be needed to support other expenses of the business.

The best advice when dealing with the IRS to set-up an installment agreement on your business is to hire a Tax Attorney or CPA to represent you, especially if a Revenue Officer has been assigned to your case. The IRS will first review your business to determine if it is viable. They will make a determination as to whether your business is capable of meeting tax obligations and still having a profit and whether your business should continue to operate. The IRS may also deny expenses claimed on your tax return, such as depreciation, when determining your business’s ability to pay.

For most people, their business is their livelihood. Therefore, it is essential that it gets into and remains in compliance with the IRS, continues to operate, and the payment plan is something that can be afforded by the business. A Tax Attorney or CPA can help you to navigate the IRS forms and can represent you before the IRS to achieve the best possible results.