Company Restructuring - Trust Fund Recovery
Knock all penalties and interest off using this effective tax debt resolution strategy
As a corporation or two member limited liability company, the only amount the IRS can assess against an individual who is responsible for the non-payment of payroll taxes is the Trust Fund Portion of the tax. The Trust Fund Portion is the withholding and employee share of the FICA and Medicare tax.
If a corporation or two member limited liability company (as a single member LLC the total amount of the liability is passed to the individual member) were to shut down its current EIN number and “re-open” underneath a new EIN and new type of entity the only liability remaining would be the aforementioned Trust Fund tax. 100% of the penalties, interest and the businesses matching portion of the FICA and Medicare tax dies with the old EIN. If this process is done correctly the IRS can now only pursue their collection action through the individual and not the new entity.
Some people would ask why would they do this if it opens themselves up personally to the businesses tax debt. Even as a business continues to operate and was on a formal payment plan doesn’t mean that the IRS cannot or will not try to collect through the individuals who they find as “willful” and “responsible” individuals for the non-payment of the tax. Then the IRS has more avenues in which to collect the liability. We have recently heard from several IRS Revenue Officers that they are under instruction to promptly assess the Trust Fund Recovery Penalty once they receive a case in their inventory that is due to unpaid payroll taxes.
The assets of the closed business entity would need to be addressed. If there was equity in any of the assets the IRS may require an appraisal of the assets at a quick sale value. Whatever this amount is the IRS would request it is paid to them in order to have the lien released from all the assets being transferred into the new entity.
This type of tax debt resolution works best for businesses that have little or no equity in its assets. It is important that certain procedures be followed or the IRS may make a case for an “alter ego” nominee. If a nominee assessment is made on the new entity then all the old companies liabilities will be transferred to the new entity.If this is done correctly the savings are extravagant. To find out if this type of tax debt resolution may work for you contact Patriot Tax Resolution Company today.
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