A factoring company must rely that your business 941 payroll taxes are being paid in full and the obligations are current. For invoice factoring, knowing all payroll taxes are paid up to date on a regular basis is paramount to the funding relationship. Accounts receivable finance companies have procedures to make sure these taxes are being paid on time. A factor is concerned because the IRS can lien a business, step in and demand all monies incoming to the delinquent company which would include payments on invoices where the factor has made advances. In other words, the factoring company having purchased the proceeds on an outstanding invoice would now watch the IRS collect from the account debtor.
Once the factoring company is aware of an IRS lien they can make arrangements to get an subordination from the IRS which will allow it to fund the delinquent business. So having delinquent IRS payments does not necessarily mean you cannot factor your invoices. It means the invoice factoring company has to pay particular attention to the ongoing relationship with the IRS. Even to the extent of making the payments directly from the invoice advances.