Penalty Abatement: penalties on past due payroll taxes can add up quickly, making a bad situation worse. However, penalties can be partially or completely removed if you can provide the IRS a good reason for the taxes not being filed, not being paid completely or not being paid at all.
Remember, IRS Revenue Officers are not in the business of writing off penalties. At the first level they’re trained to “just say no”. Penalties are usually removed at the appellate level, after a trained Professional has composed a legal letter citing recent or past court cases where verdicts favored the client in similar circumstances. Call our office for help on this.
Installment Agreement: To even be considered for a payment plan/installment agreement, you first must be current on all your payroll tax deposits and employment tax return (941) filings. Be aware that even if you are approved for an installment agreement, you’ll still be paying off interest and penalties on the back taxes you owe.
However, keep in mind that selling the IRS on a payment plan for payroll taxes is tough. They usually have a hard time believing you’ll have the ability to successfully complete a payment plan when it’s obvious you’re having a hard time keeping up with your current payroll.
Convincing the IRS that your business would be better off open than closed, should be a job left to a qualified Tax Attorney who deals with IRS Revenue Officers every day, and knows what issues are important to make clear.
Bankruptcy: Although many taxes are dischargeable in bankruptcy, payroll taxes can never be discharged with any form of bankruptcy. Bankruptcy, however, may still be recommended. This would be a Chapter 11 Bankruptcy since it alleviates many of the financial pressures and obligations on the business, and allows “breathing room” for the business to focus on paying the IRS. Filing and keeping a Chapter 11 bankruptcy is usually very complex and expensive and should only be pursued after all other solutions are considered.
In-Business Offer In Compromise (OIC): An offer in compromise is basically a proposal to the IRS to “compromise” the debt with your business and accept an offer of less than the total taxes owed. As you can imagine, in the case of past due payroll taxes, getting the IRS to accept such an offer is very difficult. In order for the IRS to even consider an In-Businesses Offer in Compromise, the company must be up-to-date and compliant with all tax obligations for two years before filing the OIC. An In-Business Offer in Compromise is difficult and should only be handled by an experienced IRS Problem-Solver. Keep in mind that any OIC on a business will require financial information on the owner(s) as well.
The Taxpayer Advocate Service (TAS): if you have received Final Notice of Intent to Levy, you can submit a Form 911 to the The Taxpayer Advocate Service (TAS). The TAS is an independent office within the IRS whose purpose is to help individuals and businesses resolve problems with the IRS. The TAS generally requests that certain IRS collection activities (such as levies) be stopped while your request for assistance is pending.
To get assistance from the TAS, you need to prove that you are experiencing or are about to suffer economic harm...which will likely be the case if you’re about to be levied by the IRS for trust fund taxes.
Convince the IRS that if they shut you down, there’s LESS chance they’ll get paid: what it boils down to is, the IRS is most interested in getting paid. There may be a compelling case that if the IRS shuts your business down, you’ll be much less likely to ever pay off the debt. For instance, say you’re close to retirement age. At your age, the chances of you finding a job that would pay you close to what you’re making as a business owner are slim. For example, if you end up working at Home Depot for $8/hour, the IRS knows it is likely to never see their money. Again, this is a case better left to be argued on your behalf by an experienced Tax Attorney.
As you can see, each of the potential solutions I’ve listed for keeping your business open when experiencing a payroll tax problem has its share of challenges and potential pitfalls. And there’s no guarantee the IRS will accept any proposed solution, no matter how reasonable it seems to you.