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During the Sept. 12, 2012 IRS webinar titled “Payment Alternatives – When You Owe the IRS,” Traci Suiter, lead public affairs specialist with IRS’s Small Business/Self-Employed Division, explained the criteria that must be met for a business owing payroll taxes to qualify for an In-Business Trust Fund Express Installment Agreement (IBTF-Express IA). These plans don’t require detailed financial information and may help the owner to avoid a responsible person penalty.

Background on installment agreements. IRS may enter into written agreements with any taxpayer under which that taxpayer may make payment on any tax in installment payments if IRS determines that the installment agreement will facilitate full or partial collection of the tax liability. (Code Sec. 6159) Before entering into such an agreement, IRS determines if it’s appropriate for the circumstances and then sets up the agreement, processes the payments and monitors the taxpayer’s compliance with the agreement. If a taxpayer fails to comply with any of the installment agreement’s terms, the agreement is deemed to be in default and IRS has the right to terminate the agreement.

Guidance on IBTF-Express IAs. In order to qualify for an IBTF-Express IA, a business owing payroll taxes must satisfy the following requirements:

  • They must owe $25,000 or less at the time the agreement is established. If they owe more than $25,000, they may pay down the liability before entering into the agreement in order to qualify.
  • The debt must be paid in full within 24 months or prior to the Collection Statute Expiration Date (CSED), whichever is earlier.
  • They must enroll in a Direct Debit installment agreement (DDIA) if the amount they owe is between $10,000 and $25,000.
  • They must be compliant with all filing and payment requirements.

One of the advantages of applying for an IBTF-Express IA is that a business is generally not required to provide a financial statement or financial verification as part of the application process, so the agreement is likely to be approved more quickly than other payment alternatives. The Internal Revenue Manual (IRM) also notes that it is IRS policy not to pursue the trust fund recovery penalty against an individual in a business that has set up an IBTF-Express IA.