How to Address Payroll Tax Debt

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Not Enough Payroll Last Year — And Now You Owe the IRS Even More: How to Get Off the Hamster Wheel

If you count yourself among the many small business owners who dread running payroll, you may struggle to keep up with stringent tax obligations. This can cause a world of trouble when the IRS gets involved.

Perhaps you’ve dealt with payroll issues in the past and now find yourself facing considerable debt. Your situation might feel hopeless. With swift action, however, it’s possible to keep your business tax issues manageable. Here’s how:

Consider an Offer in Compromise

Many businesses that struggle with tax debt ultimately conclude that the offer in compromise represents the most financially prudent solution. This strategy makes it possible to settle tax debts for less than is actually owed.

If your OIC request is made on the basis of a doubt as to collectibility, your eligibility will hinge on whether the IRS has determined that you are able to pay. Keep in mind that, while applying as a business, you’ll need to furnish information such as gross monthly payroll and whether you outsource either payroll processing or tax return preparation.

Seek the In-Business Trust Fund Express Installment Agreement

As a small business with limited payroll debt, you may be eligible for the In-Business Trust Fund Express Installment Agreement (IBTF-Express IA). It’s possible to qualify for this installment plan without providing financial verification. If allowed to proceed, however, you may be required to pay off your debt within 24 months. Depending on how much you owe, you may also need to obtain a Direct Debit installment agreement.

The IBTF-Express IA isn’t always an option for businesses with multiple years’ worth of payroll tax debt, but it’s definitely worth considering if you owe less than $25,000 or are able to swiftly pay down anything over $25,000.

At the Highland Tax Group, we provide proactive and highly empathetic support to small business leaders dealing with complicated tax issues. Reach out today to learn more about our tax resolution services.