There is nothing more chilling for a small business owner than the realization at tax time that you owe money — big money. You may be considering a variety of options such as paying Uncle Sam with your credit cards, dipping into your retirement accounts, or the big no-no of withholding payroll. All have been done before and all have major disadvantages to them that do not make them the best option.
So what can you do? You can approach the IRS and ask for an installment plan. Generally, the IRS says you cannot be turned down for an installment agreement as long as you don’t owe more than $10,000 and you’ve filed your returns on time and paid any tax due during the previous five years. You also cannot have entered into a previous installment agreement during that time. And you must pay what you owe within three years.
If you do owe over $10,000, you may still qualify for an installment plan, but you will need to seek special permission from a IRS district office and probably submit additional financial statements to qualify.