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Tax Bites, Issue 2, November 2012

More Small Businesses to Benefit from IRS Installment Agreements

This article is the second in our series on the Fresh Start program, which the IRS implemented in 2011. In future articles we’ll look at other provisions of the program such as direct debit installment agreements and tax lien withdrawals.

As part of their recently expanded Fresh Start program, the IRS will make it easier for small businesses to participate in streamlined installment agreements to pay their tax debt. If your business owes less than $25,000 in taxes, you can potentially benefit from this program.

Previously, only small businesses with less than $10,000 in tax debt could participate in installment agreements. Raising the threshold means many more small businesses will be able to benefit from paying in installments.

In addition to raising the unpaid tax limit, the IRS will take an expanded look at other debt obligations in determining your monthly payment amount. All businesses are eligible for this program – whether they file as an individual or a business.

Many times, direct debit agreements are set up for repayment. A direct debit agreement is not required for participation, but in most cases, a business can avoid a tax lien if it agrees to one.

Although the IRS would prefer businesses pay their tax liabilities within 24 months, it is possible to structure agreements up to 10 years. And, businesses with more than $25,000 in tax debt are eligible to participate in installment plans once they pay their balance down to $25,000.

Easier access to installment agreements should allow many small businesses to pay their tax obligations while at the same time freeing up cash flow to continue funding operations. That is good news for everyone, as small businesses play a vital role in our economy.

P.S. For more on how you can benefit from the Fresh Start program, you can visit the IRS website or call me, Katie Lawson, at 919-885-4019.

Katie Lawson is an experienced tax attorney serving clients in Raleigh, Durham and across North Carolina. She holds a bachelor’s degree in accounting from the University of South Carolina, a juris doctorate from the North Carolina Central University School of Law, and a master of laws degree in taxation from the University of Washington School of Law. She is active in the North Carolina Bar Association and the Durham County Bar.


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