Business tax relief: sales tax, payroll tax and IRS business debt

Business tax problems rarely look like individual ones. A restaurant that falls behind on sales tax, a contractor who skipped a few payroll deposits, or an S corporation that closed with an unpaid 941 balance each faces a different agency, a different set of penalties and a different question of who is liable.

Payroll taxes are the most serious federal business debt. Income tax and the employees' share of Social Security and Medicare that you withheld are "trust fund" taxes. If they aren't paid, the IRS can assess the Trust Fund Recovery Penalty against any responsible person who acted willfully — regardless of whether the business is an LLC or corporation, and even after it closes. Late deposits also trigger failure-to-deposit penalties of 2% to 15%.

Sales tax is collected by each state's revenue agency, not the IRS. Because you collected it from customers, most states treat unpaid sales tax as money held in trust and can pursue responsible owners or officers. Payment agreements, compromise programs and license consequences differ widely from state to state, so we only describe a state's rules when we can cite its official guidance.

IRS payment plans are available to businesses. The IRS's Simple Payment Plan covers businesses that owe up to $50,000 without trust fund taxes, or up to $25,000 with them ($50,000 for an out-of-business sole proprietorship), with no financial statement — as long as all filings and current payments are up to date. Larger balances usually require Form 433-B.

Start with the free assessment below. It takes about two minutes, shows results without asking for contact information, and explains which options may be worth exploring for your business.