Corporation with unpaid trust fund taxes and income taxes


Any suggestions about how to deal with doing an OIC for a corporation with no assets (sole owner/sole employee) where there are unpaid 941 and 1120 taxes?


I’ve had a client or two a while ago in a similar situation. The IRS will often waive the corporations share of the ss/mc trust fund taxes and only make them pay the amounts withheld from the employees paychecks. The tax debt ultimately falls on the Designated Responsible Party in charge, and authorized, to make the payroll tax deposits.

Like all other debts, the taxpayers ability to pay is determined by their 433. If it is determined uncollectible they won’t require payments, or if they can make an OIC and have mitigating circumstances (now disabled, etc) you can get them to settle for the remaining balance.

Just getting the employers portion of ss/mc discharged can wipe out 1/3 to 1/2 of their tax debt but the IRS often won’t allow the taxpayer to operate a corpoartion or have employees after such a discharge. They “lock you down” so you can’t get in the same situation again. Think of… sole proprietor with leased employees or employees from temp agency.

I suggest calling the practitioner priority service hotline and choosing ‘general tax law questions’ option and get some answers straight from the IRS, as policy changes over time.
IRS Practitioner Priority Service # (866) 860-4259


Is this a C or an S corp?