150k in Trust Fund Penalties and Income Tax Debt Reduced to $1,000 Mr. C had multiple financial problems that came together to create a perfect financial storm. In addition to mounting medical expenses associated with a serious chronic health issue, he had numerous financial problems were the result of failing to meet his business tax responsibilities. In addition, failing to file income tax returns for the past seven years, his business had been improperly paying their payroll taxes.
Hoping to crawl out of what amounted to a complete financial disaster, Mr. C contacted Professional Tax Resolution for assistance.
During the initial phone consultation with one of our tax professionals, Mr. C informed us he had not filed tax returns for the previous seven years. He also related the problems he was experiencing associated with the improper handling and payment of company payroll taxes. Because a portion of these funds actually belong to the employee and are being held in trust by the employer, the IRS imposes a stiff penalty when these taxes are mismanaged or underpaid. The penalty, aptly named the Trust Fund Recovery Penalty, is equal to 100% of the back tax balance owed and cannot be forgiven though bankruptcy proceedings. A business owner who receives an IRS Notice and Demand for Payment for a back tax balance that is due to the underpayment of payroll taxes may file an appeal within 60 days of receiving the notice. Outside of that, the only method for resolving a back payroll tax balance other than paying the full amount due is through an accepted IRS Offer in Compromise.
The Professional Tax Resolution tax team approached Mr. C’s various business tax issues in a methodical way. Our initial goal was to gather the financial data necessary to file the previous seven years of tax returns. Once these returns had been completed and submitted, we were able to put a number on his outstanding tax liability which turned out to be well in excess of $100k. This total represented a combination of unpaid income taxes and Trust Fund Recovery Penalties. Taking this large amount of tax debt into consideration together with his poor financial condition led us to the conclusion that Mr. C would be a good candidate for an IRS Offer in Compromise. Once this determination was made, our team got right to work gathering the necessary documentation, calculating a reasonable offer and submitting the Offer in Compromise petition. The end result was an outstanding success. The IRS agreed to resolve the entire amount of Mr. C’s back tax balance for $1000, an amount equal to less than one percent of the original balance.