“Dear Jim,
My husband and I have a small business.
He did not pay our payroll taxes.
He used the tax money to run the business.
The IRS has our account on hold at this time because technically he does not have a job.
He says he is looking for a job and the IRS agent that we deal with has told him to close the business.
He is having problems getting rid of the equipment left that is not sold.
He says he is looking for a job but he has not gotten one yet and he is so busy with the business being still open that he doesn’t focus enough in order to get a job.
Help us find out how to salvage our lives. We are completely feeling hopeless, overwhelmed and depressed about our financial situation. People have told me to leave my husband because he has ruined my credit and put me in harms way by having the business in my name.
We have so many bills.
I want my freedom back !!
Annitra”
Dear Annitra,
Thanks for your question.
I will try and answer it based on the facts that you provided. It would be helpful to know the amount of payroll taxes that are unpaid and how your business is organized (LLC, partnership, corporation) to provide you the most specific options that could help you. However, I think I can provide you some options.
First it is important to understand what the IRS is doing on your tax debt, based on the information you provided:
- Because you owe payroll taxes, part, if not all (depending on how your business was organized), of the liability will be assessed to your husband and you personally (assuming you both owned the business).
- The IRS Revenue Officer who is assigned to your unpaid balance account will determine the ability for both your business and you (personally) to pay the liability
- He/she will most likely determine how to pay which may include any and all of the following: selling assets of the business, payment plan or payment deferral.
- Based on your information, I believe that your Revenue Officer has decided on “currently not collectible” because you do not have any means to pay what is owed, either from your business or personal finances.
- The IRS will ask you and your husband to borrow, if able, or sell assets to pay off the liability. It sounds like selling assets has already started.
- The Revenue Officer may have requested that you close the business if you are not current with your payroll taxes.
Here are some options:
- Close the business: Sell whatever assets and pay the residual proceeds, if any, to the IRS. What will remain is the liability assessed to you personally on the unpaid payroll taxes. Determine your ability to pay and get into currently not collectible or a small payment plan, depending on his income and expenses. Note that your expenses will be limited to necessary living expenses that are paid, subject to the IRS allowable living expense standards. In short, everything you pay may not be allowed in determining your ability to pay the IRS (examples are charitable contributions, credit card payments, payment sot recreational assets, other unsecured creditors, etc.).
At this point, if your financial circumstances permit, you should file for an offer in compromise. Your Revenue Officer can assist you with that process. Understand that few people qualify for the OIC- but review to see if it is an option. I would be glad to provide you some free advice if you wish. Note that currently not collectible status will be reviewed each year. If your financial situation changes
- Continue the business: If you continue the business it will be imperative that the business is viable as a going concern and will be able to pay its payroll taxes. The government will not allow this practice to continue- so it is best to make that hard decision now. It is emotionally difficult to close a business, but you must step back and determine if it is viable. Again, the IRS will place you in a stats based on your ability to pay and you should consider filing an OIC, if it is viable and in your best interest.
You probably already have a tax lien filed on your business and you individually, if these taxes have already been assessed personally. The only way to remove this lien altogether (called a lien withdrawal) is to pay the tax in full or, if you owe less than $25,000, enter into a direct debit streamline installment agreement with the IRS to pay the taxes in 5 years or less. Because you do not have the means to pay at this time, your lien will exist until you meet either of these conditions.
Be warned, as soon as a tax lien is filed, you will be receiving solicitations from many “tax debt relief” firms. If you need assistance, reach out for free help or us a local, trusted provider to assist you.
One final thought, do not leave your husband over debt- work through it together. You have some tough decisions, I will be praying for you and if I can provide any direct assistance please do not hesitate to ask.
Your tax servant.
Jim
Jim Buttonow is one of the resident debt experts here at GetOutOfDebt.org that helps people for free. Jim is a licensed CPA who spent 19 years with the IRS coordinating large compliance teams of IRS agents and specialized personnel. In the last 5 years, Jim has invented consumer and practitioner software and treatises on how to address many different tax issues. He has also represented many people before the IRS examination, collection, filing, and appeals functions. He currently assists taxpayers on an active pro bono tax practice aimed at serving people in need.
If you have a tax question you’d like to ask just use the online form. I’m happy to help you totally for free.
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