Friday, July 6, 2012

New IRS Offer in Compromise Rules: How does it Affect 941 Payroll Tax Debts?

In the last few months, the IRS has dramatically changed the way they calculate Offer in Compromise settlements on back taxes: OIC Rule Changes. How do the rule changes affect businesses with 941 tax issues? The changes could make the same difference as for individuals, but as we have illustrated in posts below: it depends on the kind of entity that you are:

If you are a sole proprietorship or an LLC (with debts 2008 and older), the rules could directly help you as sole prop 941 and older LLC debts are treated the same as 1040 debts. So you might very well be able to offer much less (12 months of disposable income instead of 48 months).

However, if you are incorporated (S corp or C corp) or a multiple member LLC (with 941 debts after January 2009 )- the Offer in Compromise is still a difficult proposition. The IRS generally wants you to pay the Trust fund portion of your 941 debt in an Offer -- so the new calculation doesn't alter that. The Trust fund portion of your 941 debt is about 40 to 50% of your 941 liability. So if you want to keep your entity open and make an Offer, your Offer is usually going to be the trust fund amount.

Owe 941 taxes? Want to see if an Offer in Compromise might work? Call us at 1-888-282-4697 or EMAIL us a description of your 941 tax problem HERE and we'll contact you!


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