I Owe Back Taxes On Business: Can I Do Anything?

If you owe back taxes on your business, you are not alone—and more importantly, you are not out of options. I’ve worked with many business owners facing this exact problem, and there are proven ways to reduce penalties, stop enforcement, and regain control. The key is understanding your choices and acting before the situation worsens.

So, I owe back taxes on business—can I do anything about this? Yes. Business owners who owe back taxes can resolve the debt through IRS payment plans, penalty relief, tax settlements, or temporary hardship status, depending on their financial situation and compliance history.

Many business owners assume unpaid taxes mean inevitable levies or closure, but that’s rarely the full story. Below, you’ll learn what causes business tax debt, the solutions available, and how to choose the best option for your situation.

What It Means To Owe Back Taxes On A Business

 

Owing back taxes on a business means the IRS (or state tax authority) believes your company failed to pay required taxes in full or on time. This may include income taxes, payroll taxes, self-employment taxes, or sales taxes. Once unpaid, penalties and interest begin accumulating immediately, increasing the balance every month.

Common reasons business owners fall behind include cash flow problems, unexpected expenses, misunderstanding payroll tax obligations, or using withheld taxes to cover operating costs. Unfortunately, payroll taxes are considered “trust fund taxes,” which makes them especially serious in the eyes of the IRS.

If ignored, back business taxes can lead to aggressive enforcement actions such as federal tax liens, bank levies, asset seizure, or even personal liability through the Trust Fund Recovery Penalty. However, the IRS generally prefers resolution over punishment—especially when taxpayers are proactive.

The most important thing to know is this: doing nothing is the worst possible option. Once you engage the IRS properly, many enforcement actions can be paused or avoided altogether.

Options To Fix Business Back Taxes

There is no single solution that fits every business, but several IRS programs exist to help taxpayers resolve debt legally.

Common resolution options include:

• Installment Agreements: Monthly payment plans based on what your business can reasonably afford
• Offer in Compromise: A settlement allowing you to pay less than the total owed if you qualify
• Penalty Abatement: Reduction or removal of penalties due to reasonable cause
• Currently Not Collectible Status: Temporary relief if paying would cause severe financial hardship
• Payroll Tax Resolution Programs: Specialized handling for employment tax issues

Each option depends on your income, expenses, assets, and compliance status. Choosing the wrong approach can cost more money and extend the problem.

What Happens If You Ignore Business Tax Debt?

Ignoring business tax debt almost guarantees escalation. After notices are sent, the IRS may file a tax lien, which damages your business credit and public record. If the debt remains unresolved, levies can freeze bank accounts, seize receivables, or garnish future income.

For businesses with unpaid payroll taxes, owners and officers may be held personally responsible—even if the business closes. This means the debt can follow you long after operations stop.

The good news is that most enforcement actions stop once you enter an approved resolution process.

Can Back Business Taxes Be Reduced Or Settled?

Yes, in certain cases. If your business cannot realistically pay the full balance, the IRS may accept less through an Offer in Compromise. This is based on your “reasonable collection potential,” not the amount owed.

Additionally, penalties—which can make up a significant portion of the balance—are often negotiable. Businesses that show reasonable cause, such as illness, natural disasters, or reliance on faulty professional advice, may qualify for penalty relief.

Interest generally cannot be removed, but reducing penalties lowers the total amount interest accrues on.

When To Get Professional Help

Business tax cases are more complex than personal tax issues, especially when payroll taxes or multiple years are involved. A tax professional can communicate with the IRS on your behalf, analyze your financials, and prevent costly mistakes.

If you’re facing liens, levies, or personal liability risks, professional representation can be the difference between recovery and financial damage.

Related Questions

Can the IRS shut down my business for back taxes?
Yes. The IRS can seize assets, levy accounts, and take actions that effectively force a business to close if the debt is ignored and unresolved.

Am I personally responsible for my business’s tax debt?
In some cases, yes. Owners and officers can be personally liable for unpaid payroll taxes under the Trust Fund Recovery Penalty.

How long does the IRS have to collect business taxes?
The IRS generally has 10 years from the date of assessment to collect tax debt, but certain actions can pause or extend this period.