Short answer
It depends on the entity and the tax. A sole proprietor owes every business tax personally. LLCs, partnerships and corporations owe their own business taxes, but income that passes through to you is taxed on your own return, and unpaid payroll withholding can become personal through the Trust Fund Recovery Penalty. General partners are usually liable too.
Key takeaways
- A sole proprietor and the business are the same taxpayer, so every business tax balance is a personal balance.
- Pass-through income from an LLC, partnership or S corporation is taxed on the owner’s Form 1040, so that bill is personal no matter what the entity is.
- Unpaid payroll withholding is the main way a business balance becomes personal: the Trust Fund Recovery Penalty can be assessed against each responsible person.
- An operating business can get a Simple Payment Plan without a financial statement if it owes $25,000 (IRS.gov, July 2026) or less in trust fund taxes, penalties and interest, or $50,000 (IRS.gov, July 2026) or less without trust fund taxes.
Who owes the tax depends on the business structure
The IRS treats each business structure differently, and that decides whose name is on the bill. Two questions matter: who owes the income tax on the profit, and who owes the employment taxes if you have employees.
| Structure | Income tax on the profit | Employment taxes | How it can become personal |
|---|---|---|---|
| Sole proprietorship | You, on Schedule C with your Form 1040, plus self-employment tax | You, as the employer | It already is. The IRS manual notes the owner of a sole proprietorship is personally liable for its employment taxes. |
| Single-member LLC (default treatment) | You, the same way as a sole proprietor | The LLC, under its own name and EIN (for wages paid after January 1, 2009) | Income tax is already yours; unpaid payroll withholding through the Trust Fund Recovery Penalty |
| Partnership or multi-member LLC | Partners, on their own returns from Schedule K-1; the partnership itself generally pays no income tax | The partnership | General partners are generally liable under state law for the partnership’s taxes; LLC members through the Trust Fund Recovery Penalty |
| S corporation | Shareholders, on their own returns; the corporation owes tax on certain built-in gains and passive income | The corporation | Pass-through income tax is yours; payroll withholding through the Trust Fund Recovery Penalty |
| C corporation | The corporation, on Form 1120, as a separate taxpayer | The corporation | Mainly the Trust Fund Recovery Penalty |
Two points surprise many owners. First, tax on income an LLC, partnership or S corporation passes through to you is your own balance; if you skipped estimated tax on your share, the bill is personal. Second, partnerships offer less protection than owners expect. The IRS manual (IRM 5.17.7) says “general partners are individually liable under state law for the debts of a partnership,” so assessments for partnership taxes are made in the name of the partnership and its general partners. A limited liability partnership can be different under state law.
Business balances sit under the EIN and personal ones under your Social Security number, with separate notices. A business notice of intent to levy is usually a CP504B; a personal one is a CP504.
Payroll taxes: the part that can follow you personally
When you withhold income tax and the employee share of Social Security and Medicare from paychecks, that money belongs to the government. If the business does not pay it over, the IRS can assess the Trust Fund Recovery Penalty against any responsible person who willfully failed to pay it. The IRS says the penalty “is equal to the unpaid balance of the trust fund tax.” The employer share of Social Security and Medicare and business penalties are not part of it.
- Responsible means having the duty and power to direct how the trust fund taxes are paid. The IRS lists corporate officers, partners, directors and payroll service providers as examples.
- Willful does not require bad intent. The person knew or should have known about the unpaid taxes and deliberately ignored the law or was plainly indifferent to it. The IRS says using available funds to pay other creditors instead is a sign of willfulness.
- The appeal window is short. You have 60 days from the date of the letter proposing the penalty to appeal, or 75 days if it is addressed to you outside the United States.
Paying rent and suppliers while payroll deposits slide is the costliest mistake small employers make. The full process, from the Form 4180 interview to payment designations, is in our Trust Fund Recovery Penalty guide. The business-side options are on the Fresh Start page for payroll tax balances.
How IRS collection works against a business
Business collection follows the same steps as personal: a bill, then a final notice of intent to levy at least 30 days before any levy. The final notices are LT11 or Letter 1058, and you have 30 days (IRS.gov, 2026) from that notice to request a Collection Due Process hearing. Our final notice action plan walks through those 30 days.
What makes business collection different is what the IRS can reach:
- Your customers. The IRS lists accounts receivable and commissions among the property it can levy. A levy on money owed to you generally reaches only what is owed at the time it is served (IRC 6331(b)); a levy on wages is the exception that keeps going. How this plays out for contractors and service businesses is covered in IRS levies on 1099 income and receivables.
- Business bank accounts. A bank levy takes what is in the account when it hits, which can stop payroll.
- Everything you own, through the lien. The IRS says a federal tax lien “attaches to all business property and to all rights to business property, including accounts receivable.” The general guideline for filing a public Notice of Federal Tax Lien is a balance of $10,000 (IRS.gov, July 2024 (IRM effective date)). See the federal tax lien notice page.
- Equipment, with a safeguard for individuals. For an individual taxpayer such as a sole proprietor, property used in the trade or business is exempt from levy unless an IRS official approves the levy in writing after finding that other assets are not enough to pay, or collection is in jeopardy (IRC 6334(a)(13)(B) and (e)(2)).
Larger or older business cases are often assigned to a revenue officer, who works the case in person and sets deadlines for financial information. If that has happened, read what to do before the first revenue officer meeting.
Payment options for business and owner balances
Treat business and personal balances as two separate problems, each with its own plan. For businesses, the IRS limits are:
| Balance | Simple Payment Plan limit | Notes |
|---|---|---|
| Operating business with trust fund taxes | $25,000 | Formerly the in-business trust fund express agreement. The limit must be met when the plan is granted; the first installment cannot be used to get under it (IRM 5.14.5.4). |
| Business without trust fund taxes | $50,000 | For example, a business with no employees that owes income or excise tax under its EIN |
| Out-of-business sole proprietorship with trust fund taxes | $50,000 (IRS.gov, 2026) | The higher limit applies once the business has closed |
| Owner’s personal balance | $50,000 (IRS.gov, July 2026) | Can be set up online through the IRS Online Payment Agreement |
The limits count assessed tax, penalties and interest. A Simple Payment Plan (formerly the streamlined installment agreement) needs no financial statement, no lien determination and no Trust Fund Recovery Penalty determination, and it must be paid by the CSED (IRS.gov, July 2026). The 21 July 2026 IRS manual removed the old 24-month payoff rule for business trust fund plans. The IRS online sign-in is for individuals; businesses apply by calling 800-829-4933 (IRS.gov, 2026), calling the number on the notice, or visiting a Taxpayer Assistance Center. Every business must be current on filing and payment requirements, and for an employer that means current federal tax deposits.
Above those limits, the IRS usually wants Form 433-B, the collection information statement for businesses (Rev. 6-2026 (IRS.gov, 6-2026)), and the owner may need Form 433-A as well. That opens the door to other outcomes, including an offer in compromise. How the options line up by amount owed is in relief by balance size, and every plan type is compared in IRS payment plans. If you need breathing room while you sort this out, see how to pause IRS collection.
Example: one owner, two balances
- The business balance is above the $25,000 trust fund limit for a Simple Payment Plan. To use that plan, the LLC would need to pay the balance down to the limit or less before the plan is granted, at least $13,000 in this example, and catch up on current deposits. Otherwise the IRS will likely ask for Form 433-B.
- The personal exposure is the $26,000 trust fund portion, which could be assessed against Dana as a Trust Fund Recovery Penalty. Voluntary payments designated in writing to the trust fund portion reduce that risk first; our trust fund guide explains how to designate them.
- The personal $9,000 balance fits a short-term plan (up to 180 days (IRS.gov, 2026)) or an individual Simple Payment Plan, set up online.
The two plans are separate, and new unpaid quarters can undo both.
Records to gather before you call the IRS or a professional
- Every IRS notice. Business and personal, sorted by tax period. Note the date on each final notice.
- Filed returns. Forms 941, 940 and the income tax return for the entity (Schedule C, 1065, 1120-S or 1120), plus your Form 1040 for recent years.
- Deposit history. EFTPS records or bank statements showing each payroll deposit, to check that the IRS credited every payment to the right quarter.
- Who did what. Who signed checks, ran payroll and decided which bills got paid. This is what the IRS looks at for the Trust Fund Recovery Penalty.
- A cash picture. Bank statements, receivables, loans, leases and business assets, for Form 433-B if needed.
- Your transcripts. Personal account transcripts through your IRS Online Account; business account information through the Business Tax Account or by phone.
The IRS says to keep employment tax records for at least 4 years after the tax is due or paid, whichever is later, and most income tax records for 3 years, longer in some situations. A well-documented return also lowers what you owe in the first place; see 12 deductions small business owners miss.
Handling it yourself vs getting help
If the business is current on deposits and under the Simple Payment Plan limit, one call to the IRS business line often sets up a plan. Personal balances under $50,000 can be handled online. Free help: the Taxpayer Advocate Service (877-777-4778 (IRS.gov, 2026)) when an IRS action causes financial hardship, and Low Income Taxpayer Clinics for eligible people.
Help is more likely to pay for itself when a revenue officer is assigned, when you face a Trust Fund Recovery Penalty interview or letter, when a levy has hit your customers or bank account, or when several quarters and entities are tangled together. Closing the business does not end any of this; see closing a business that owes the IRS. Global Gate Tax Relief offers a free consultation and, if it takes the case, quotes a flat fee upfront; it does not promise results. Request a free case review or call 1-877-800-8180.
Frequently asked questions
For a single-member LLC with default treatment, the income tax on its profit is already yours because it is reported on your Form 1040. Employment taxes are owed by the LLC under its own EIN, but the withheld portion can be assessed against you personally through the Trust Fund Recovery Penalty if you were responsible and willful.
Yes, for the trust fund portion: withheld income tax and the employee share of Social Security and Medicare. The IRS can assess a penalty equal to that unpaid amount against each responsible person who willfully failed to pay it. The employer share and the corporation’s own penalties stay with the corporation.
The IRS online sign-in for Simple Payment Plans is for individuals. Businesses apply by calling 800-829-4933 (IRS.gov, 2026), calling the number on the notice, or visiting a Taxpayer Assistance Center. The business must be current on filing and on payroll deposits.
Yes. The IRS lists accounts receivable and commissions among the property it can levy, after the required notices. A levy on a customer generally reaches only what that customer owes you when the levy is served. See levies on receivables.
The IRS collection information statement for businesses (Rev. 6-2026). The IRS usually asks for it when a business balance is above the Simple Payment Plan limits or a revenue officer is working the case.
Sources
- IRS: Business structures (reviewed 3 Oct 2026)
- IRS: Sole proprietorships (reviewed 28 Jun 2026)
- IRS: Single member limited liability companies (reviewed 27 Jul 2026)
- IRS: Partnerships (reviewed 8 Jun 2026)
- IRS: S corporations (reviewed 11 Jun 2026)
- IRS: Corporations (reviewed 17 Jun 2026)
- IRM 5.17.7, Liability of Third Parties for Unpaid Employment Taxes (6-23-2025)
- IRS: Employment taxes and the Trust Fund Recovery Penalty (reviewed 11 Oct 2026)
- IRS: Simple payment plans for individuals and businesses (reviewed 27 Jun 2026)
- IRM 5.14.5, Simple Payment Plans (7-21-2026)
- IRS: What is a levy? (reviewed 13 Mar 2026)
- IRS: Understanding a federal tax lien (reviewed 14 Sep 2026)
- 26 U.S.C. 6331, Levy and distraint
- 26 U.S.C. 6334, Property exempt from levy
- IRS: How long should I keep records? (reviewed 30 Jun 2026)
We check every figure against IRS.gov and log changes on the key figures page.
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This page is general information about IRS rules, not tax or legal advice for your situation. IRS figures change; each one links to its official source and the date we last checked it.