Can Small Businesses Use the IRS Fresh Start Program?

If you are a small business owner or self-employed professional, tax debt isn't just a personal headache—it’s a threat to your company’s survival. The IRS is notoriously aggressive when it comes to "Trust Fund" taxes (payroll taxes), often moving straight to bank levies or personal assessments against the owner.

The good news? The IRS Fresh Start Program isn't just for individuals. In 2026, the IRS expanded several "Simple Payment Plan" options to help small businesses remain operational while settling their debt.

1. The "In-Business Trust Fund Express" Agreement

The most important tool for small businesses is the In-Business Trust Fund Express Installment Agreement (IBTF-Express). This is designed for businesses that are still operating and have employees.

• The Debt Limit: Typically available for businesses that owe $25,000 or less in payroll taxes.
  
  
• The Perk: For many, you can get this plan approved without a full financial disclosure (Form 433-B). This means the IRS won't comb through your business equipment, inventory, or accounts receivable as long as you can pay the debt within 24 months.
  
  
• The Requirement: You must be "compliant," meaning all current payroll tax deposits for the last two quarters must be paid on time.

2. Relief for Sole Proprietors

If you are a sole proprietor (filing a Schedule C), the Fresh Start Program treats your business debt much like personal debt.

• Streamlined Processing: If you owe $50,000 or less, you may qualify for a streamlined agreement that lasts up to 72 months.
  
  
• No Tax Lien: If your balance is under $25,000 and you set up a direct debit payment, the IRS will often agree not to file a Notice of Federal Tax Lien, protecting your business's ability to get lines of credit.

3. The Offer in Compromise for Businesses

Can a business "settle" for less than it owes? Yes, but it is challenging. The IRS will look at the Reasonable Collection Potential of the business.

• If your business has valuable equipment, a fleet of vehicles, or significant accounts receivable, the IRS will likely reject a settlement offer, expecting you to sell assets or take out a loan to pay the tax.
  
  
• Pro Tip: Settlements are most successful for businesses that are "winding down" or those where the owner can prove that paying the full amount would force the business to close (causing job losses).

4. Staying Current: The 2026 Compliance Rule

The IRS has a "zero tolerance" policy for businesses in the Fresh Start Program. If you enter a payment plan for 2024 debt but then fail to make your 2026 quarterly estimated payments or federal tax deposits, your agreement will be defaulted immediately.

• The Fix: Before applying for [business tax relief] (link to main page), ensure your current year's accounting is perfect. The IRS wants to see that you’ve fixed the "leak" before they help you mop up the floor.

5. Can I Be Personally Liable?

Yes. Under the Trust Fund Recovery Penalty, the IRS can "pierce the corporate veil" and come after the owner’s personal bank accounts and home for the unpaid payroll taxes of the business. Using the Fresh Start Program is the best way to stop this personal assessment before it begins.

Protect Your Business Today

Small business tax law is significantly more complex than individual tax law. One wrong move on a financial statement can result in a seized bank account. Our team helps entrepreneurs navigate the IRS Fresh Start options to keep their doors open and their employees paid.