Can I Use a Merchant Cash Advance to Pay a Tax Bill?
Yes. Owners use advances to pay tax bills, including overdue payroll and sales tax, and some funders send the payment straight to the taxing agency at funding. Before you do, compare the advance's cost with an IRS or state payment plan, which is often cheaper if you qualify.
Why do owners reach for an advance to pay taxes?
A tax debt is one of the few bills that can put the business itself at risk. Tax agencies can file liens, levy bank accounts and add penalties and interest the longer a balance sits. When a notice arrives with a short deadline, owners want the problem gone fast, and an advance can clear it in days rather than weeks.
Should you look at a payment plan first?
The IRS offers installment agreements for many business tax debts, and most states run their own plans. Penalties and interest keep running while you pay, but the total cost is often well below what an advance costs. If you qualify and the plan's payment fits your cash flow, it's usually the cheaper route. An advance makes more sense when a plan isn't available, when a levy is imminent or when the business needs the lien gone quickly for another reason, like a bank loan or a sale.
What do funders think of tax liens?
A federal tax lien is a public record, and funders find it in their searches. Many will still fund, but they want one of two things: the lien paid at funding, or a payment plan in place and current. A lien that's growing with no plan is a warning sign, because a levy on your bank account would stop the funder's payments too.
Why do payroll taxes come first?
Unpaid payroll taxes are different from other tax debts. The money withheld from employees' paychecks is held in trust for the government, and the people responsible for paying it can be held personally liable if it isn't paid. If you're behind on payroll taxes, treat them as the top priority, ahead of almost any other bill.
Can the funder pay the agency directly?
Some funders prefer to send the tax payment straight to the IRS or state agency at funding. It gives them confidence the lien will be released and keeps the money from going elsewhere. Ask for the payment confirmation, and keep it with your advance paperwork.
What should you do after it's paid?
Get written confirmation from the agency and track the lien release, which can take some time to show up in public records. Keep copies. Future funders and banks will ask about any lien they see.
How do you stop the cycle?
Tax debts often come back because the money was never set aside. Open a separate account and move a share of every deposit into it for taxes. It's the simplest habit that keeps the next notice from arriving.
How can Afterfirst help with this?
Call 877-FUND-654 and tell us what's owed, to which agency and whether there's a lien or a plan. We'll show you what an advance costs next to the payment plan option, and if the plan is cheaper and available, we'll say so.
What else do owners ask about this?
- Do I need tax returns to get a merchant cash advance?
- Can I get an MCA if I'm behind on rent?
- Can I use a merchant cash advance to buy a business?
More short answers on this topic are on the uses and situations FAQ, and the MCA payment calculator runs the numbers for your own file.
Where do these facts come from?
Have a question we didn't answer?
Ask us on the call. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.