Advice please - IRS Negotiations?
NoNamePlease
business that folded over a year ago. He did not remit any
taxes or witholdings in the final 7 months that it operated.
He has been negligent in dealing with this proactively. I'm
kicking him in the butt to get him to finish this before he
(and possibly I) go to jail. We recently received some
early vesting of some stock options, so now we have cash to
pay the debt.
My question - is it worth paying a professional to negotiate
the interest and penalties? If it is, who does that kind of
thing?
He called a company, but they just seem like snake oil
sellers to me.
Thanks for any advice,
Me
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Phil Marti
> First, the long story: My husband tried to open and run a
> business that folded over a year ago. He did not remit any
> taxes or witholdings in the final 7 months that it operated.
<snip>
> My question - is it worth paying a professional to negotiate
> the interest and penalties?
No. The only reason IRS would have incentive to settle for
less than what's due would be if he couldn't pay, and he can
pay. Stay after him on this until he gets it done. He can
just file the returns and pay the tax due. That will stop
the penalties and interest, which he can pay when he gets
the bill.
--
Phil Marti
Clarksburg, MD
Harlan Lunsford
> First, the long story: My husband tried to open and run a
> business that folded over a year ago. He did not remit any
> taxes or witholdings in the final 7 months that it operated.
>
> He has been negligent in dealing with this proactively. I'm
> kicking him in the butt to get him to finish this before he
> (and possibly I) go to jail. We recently received some
> early vesting of some stock options, so now we have cash to
> pay the debt.
>
> My question - is it worth paying a professional to negotiate
> the interest and penalties? If it is, who does that kind of
> thing?
>
> He called a company, but they just seem like snake oil
> sellers to me.
>
> Thanks for any advice,
Dear "Me",
The best advice I can give you is to seek competent local
tax help, in the form of an Enrolled Agent (EA), or even a
CPA. But when "interviewing" determine that the EA or CPA
does do rep work (representation work).
When your husband meets with him, he should bring all
pertinant papers with him. The rep will want to know what
form of business organization pertains, whether your
husband operated as a proprietorship, or other, e.g.
corporation.
YOu say "we" recently received vesting in stock options,
etc.... Depending on the state you live in, and who has the
stock options (either you or your husband (but not both
necessarily) the IRS may or may not be able to touch
those. But then I'm no lawyer, and your state may have
different setup, i.e. community property laws.
ChEAr$,
Harlan Lunsford, EA n LA
effi
> First, the long story: My husband tried to open and run a
> business that folded over a year ago. He did not remit any
> taxes or witholdings in the final 7 months that it operated.
>
> He has been negligent in dealing with this proactively. I'm
> kicking him in the butt to get him to finish this before he
> (and possibly I) go to jail. We recently received some
> early vesting of some stock options, so now we have cash to
> pay the debt.
>
> My question - is it worth paying a professional to negotiate
> the interest and penalties? If it is, who does that kind of
> thing?
>
> He called a company, but they just seem like snake oil
> sellers to me.
you are undoubtedly going through some sleepless nights, few
have to endure what you are experiencing, the awesome power
of the irs
you may need to check with an attorney and/or the irs, but
it seems you won't be going to jail (unless there was
criminal activity involved, which you mentioned none)
interest and penalties are not "negotiated" with the irs and
yes, snake oil sellers still exist, puffery is legal in
sales, some call it little white lies
sounds like your husband and you both acknowledge the debt
is owed, and you are pursuing the proper path, payment of
the debt to the irs
usually people in your position want to make sure and file
all applicable returns, even if the irs says they already
filed returns for you, their returns aren't the same as if
you file
state tax issues could also be present
the above isn't advice
you could probably pay someone a lot of money to give you
advice, if you do, get it in writing, signed by them
Gene E. Utterback, EA
> "NoNamePlease" <NoEmai...@MyHouse.com> wrote:
>> First, the long story: My husband tried to open and run a
>> business that folded over a year ago. He did not remit any
>> taxes or witholdings in the final 7 months that it operated.
> <snip>
>> My question - is it worth paying a professional to negotiate
>> the interest and penalties?
> No. The only reason IRS would have incentive to settle for
> less than what's due would be if he couldn't pay, and he can
> pay. Stay after him on this until he gets it done. He can
> just file the returns and pay the tax due. That will stop
> the penalties and interest, which he can pay when he gets
> the bill.
You should seek professional help and you do need to be wary
of the snake oil salesmen out there. One of the responses
to your post says that the only reason the IRS would have to
settle would be if he couldn't pay, another post says
interest and penalties are not negotiable. In my 22+ years
of experience, these are incomplete answers.
There are several reasons why the IRS would consider a
settlement and that settlement can include a negotiation of
penalties. Though interest is a statutory matter and cannot
be negotiated, interest is calculated on the tax plus the
penalties, so if the taxes and penalties can be negotiated
down then by default you will pay less in interest.
The IRS can settle tax debts for one of three reasons: 1 -
doubt as to liability; 2 - doubt as to collectability; and 3
- in the interest of effective tax administration. While it
seems from the limited information you provide that you
won't qualify for 1 or 2, you may qualify for the third
option, it depends on the facts and circumstances of your
situation.
You also need to be aware payroll taxes consist of two parts
- a trust fund portion (where you withhold from the
employees) and the employer's portion. Trust fund taxes are
serious and carry significantly more serious penalties -
including a possible penalty of 100% of the tax due,
assessable to almost anyone who could and did sign company
checks - than the employer's portion. Trust fund taxes are
seldom negotiated, but the penalties can be negotiated - I
know, I've done it.
That's the technical aspect, here's the practical part -
representation for these matters is not cheap. Most tax
professionals who do rep work and who know what they are
doing charge serious fees to work on cases like this.
Additionally, one of the caveats among my peers is that
almost all of us want our money up front before taking on a
case like this - after all you have shown that you don't pay
your bills, hence we are not likely to take your word that
you will pay us after we fix the problem.
Another important thing for you to consider is that even
while I can tell you about cases where I've successfully
negotiated lower taxes and penalties in situations such as
yours, the fact is that getting a resolution is almost
purely a matter of administrative grace on the part of the
IRS. While they are usually willing to consider a
settlement, it has to be reasonable under the circumstances.
One factor in your favor is that the business has ceased
operations.
Depending on where you live, you can expect representation
costs to run anywhere from $50 per hour to $250 per hour.
Our office has a 10-hour minimum fee for rep work and we
require that amount as a nonrefundable retainer up front.
So you have to consider what you owe to the IRS versus the
cost of representation. If you owe the IRS $2,000 in back
payroll taxes and it's going to cost you $2,500 for
representation, you're better off just paying the IRS.
However, if you owe the IRS $200,000 in back payroll taxes,
a representation fee of $5,000 might be worthwhile.
I'd recommend you go online to www.naea.org, this is the
National Association of Enrolled Agents' web site. Enrolled
Agents, but the very nature of their credential, are tax
specialists - though not all do rep work. You can search
for an EA in your area who specializes in rep work. Find one
and make an appointment to discuss your situation. Most
good pros who do rep work will give you an initial
assessment of your case for a reasonable fee, then you can
decide what you can and should do. From there you can even
negotiate the fee with the rep.
Good luck,
Gene E. Utterback, EA, RFC