If you have defaulted on your 941 payroll tax payments and have built up a debt and are now dealing with the IRS and working it out, there is a reality check you need to address and fully understand so you do not get trapped into a no win situation.

In fact it just happened to a client and fortunately I was able to stop it before he fell into the trap. Here is how it went. Of course the owner operator was deemed the responsible party, so the debt of the business is now the debt of the individual owner.

After a fairly vigorous discovery and investigation period were the IRS agent learned all she could through the collection process including the 433A and B forms and other demands for financial documentation, and was pushing the client into entering into an aggressive payback program requiring large weekly payments, enough to satisfy the debt within a few years time. She “promised” that after a period of paying on this plan, the client could enter into an offer in compromise  and reduce the amount owed and that she would help make this happen.

Ridiculous…It ain’t so.

Very simply stated and an important strategy to understand in any workout, if the borrower can afford to payback the debt, what is owed, and demonstrates this ability by entering into an agreement and performing on it for a period of time, why would the IRS or anyone accept a discounted payoff when they already know they can get a full pay out with interest and penalties accruing along the way as promised and as performed to date? It will not happen. There is no good reason.

Further, the separation between the Offer in Compromise department from the Collection Agent is extreme, and one has little to do with the other. Thus she has almost no influence whatsoever.

Her plan was bad advice. Selling blue sky which will never happen, and enticing the tax payer into a very expensive and brisk payback with a false promise of salvation later on. It will never happen.

Never enter into a pay back agreement and then perform  if your intent is to negotiate an offer in compromise. This is the wrong kind of cooperation and works against your best interests…always.

Better to accept reality and stay with the likelihood that you cannot afford to payback the full debt while now paying current 941 taxes and briskly reducing the  past obligation. It makes little sense and is likely to result in default again anyways, so whats the point. You have already entered into default and now are primed to do an offer in compromise…so do it. Do not expect you can do both. Its one or the other, pick your poison.

Its not about pleasing the revenue officer so maybe he will be nicer to you, its about being able to afford the workout and resolve the issue while staying in business. That’s the challenge. they are fine with closing you down and liquidating your assets irrespective of what the return will be. Even nothing is ok.

Alternatively, it is unlikely you will be able to afford both the aggressive payback program the service is demanding you accept  and ongoing current payments. Its too much, and paid weekly, no room to breathe

Bound to fail.  Do something else. Qualify for a discounted payoff, then schedule the payments over time and get it done, but the first time you make a payment on their “plan” your workout days are over, it will be straight to liquidation a soon as you default one more time.

You never want a full payment program unless there are extenuating circumstances that prevent a viable Offer in Compromise. You can enter into a payment plan for the accepted offer in compromise, however. That’s the best plan. Call for some help 413-549-2966.

Possibly related posts: (automatically generated)