Million Dollar Irs Bill and Foreclosure Any options

[car67]

I have a family member who owes $1 million dollars in payroll taxes with penalties and interest. He also hasnt paid on his second mortgage and the banks are trying to forecloseure. Also he hasnt filed taxes personal or corporate since 2004 and he is so far down in a deep hole I dont see any options for him. He is 67 years old, had a good construction company but nothing left everyone is gone and no work coming in.... All he gets is SSI....... I know a 13 can help with the foreclosure but the issue is taxes. He can file all his paperwork to get the years caught up to be in a position to file but I also know the tax bill is priority debt and fron what I gather it must be paid in full over the 5 year span....... There is no chance this guy will recover to make that kind of coin at his age with loss of everything. What if anything can be done?

Is there any way to file a 13 if the taxes are filed and then pay what he can afford in taxes and arrears on foreclosure and exit the 13 in 5 years with a portion fo tax bill still owing. I am sure death will come before this bill is ever paid in full? Legal thoughts or strategies needed?

[car67]

OOPS ment to say all he gets for income is Social security and that is it. I think he needs to face reality let the house go and get into a low income housing program and call it good and not have any assetts.... Not anything the IRS or creditors can do to a person on social security wth no assetts......

[HHM]

That's tough. Chapter 13 is not going to help, he would have no way to fund it. A chapter 13 requires that priority debt actually be paid, no way he could do it. (well, let me back track, no way he could do that unless the IRS were to agree not to be treated as a priority claimant).

1st, he will need to get some help with the IRS and try to stabilize that situation. Not paying payroll taxes can lead to criminal prosecution. Also, the IRS CAN garnish social security.

2nd, file all missing tax returns

3rd, let the house go.

Basically, he needs to divest himself of any assets, and request from the IRS that he be deemed non-collectable.

[RunningMan]

I think IRS debt can be converted to unsecured debt if it is more than three years old. However, $1,000,000 exceeds the limit for unsecured debt in a chapter 13. I am not a bankruptcy attorney, but I think he should probably wait the three years and file chapter 7. The IRS is very agressive at collecting 941 taxes, especially the "trust fund" portion. There is an employer and an employee portion of the taxes and the employees share is the "trust fund" amount that you withold from their paycheck and pay on their behalf. They view it as stealing money from the employee. They will levy his assets including his bank accounts. I suppose jail is a possibility, but I don't think they would press criminal charges unless there was criminal intent. Depending on how large his company was $1,000,000 in payroll taxes could have been only a few months or it could have been years.

[car67]

I dont think he has a chance, I think he has to get a non collectable status and file his returns and come clean or they going to house and feed him or he will check out to the other side........ All options rather bleak... Sad but thanks for advice and input!

[HHM]

I think IRS debt can be converted to unsecured debt if it is more than three years old. However, $1,000,000 exceeds the limit for unsecured debt in a chapter 13. I am not a bankruptcy attorney, but I think he should probably wait the three years and file chapter 7. The IRS is very agressive at collecting 941 taxes, especially the "trust fund" portion. There is an employer and an employee portion of the taxes and the employees share is the "trust fund" amount that you withold from their paycheck and pay on their behalf. They view it as stealing money from the employee. They will levy his assets including his bank accounts. I suppose jail is a possibility, but I don't think they would press criminal charges unless there was criminal intent. Depending on how large his company was $1,000,000 in payroll taxes could have been only a few months or it could have been years.

A good chunk of this IRS debt is back withholding tax, that type of tax is simply non-dischargeable, there is no time limit. Criminal intent can be proved circumstantially, non-payment of tax, huge tax debt, didn't file returns, that all points to an intent to not pay taxes. It is rare for the IRS to submit cases to CID (Criminal Investigation Unit), but it does happen, especially once you start getting that $1MM+ owed.

As suggested, he needs to file the tax returns (that will probably keep him from ending up at CID), let the house foreclose (doesn't sound like he can afford it anyway), and try to get non-collectible with the IRS. Ultimately, the IRS has 10 years to collect the tax. So, there is a statute of limitations to shoot for, but he needs to stabilize the situation with the IRS or they will levy is SSI benefits.

[RunningMan]

That sounds like good advice HHM. I would like to point out that 67 is not that old these days. With good genes and good health he could live another 30 years. His situation is not hopeless and he still has family like you that cares about him. Don't let him get depressed and give up on life.

[kornellred]

I would think that anyone who owes the IRS a million dollars would have zero chance of collecting social security. Unless, by some convoluted exclusion, the IRS cannot withhold social security benefits.

[BigJohn]

I know of one person who has a business and hasn't filed for at least 30 years. He claims he makes a lot of money but in reality he lies a lot.

Hard to believe the IRS would allow a business to run up a tab of over 1 million dollars without intervening a long time ago.

I suspect the debt is mostly interest and pentalities.

Sounds like he needs somebody to go to bat for him that knows how to handle the IRS like a CPA or lawyer.

[car67]

Well original bill was little under 180k now with penalties and interest its spiked to a million already! I have passed the advice along we will see how he handles it... The clock is ticking and I would go crazy with this over my head...... Yes he gets Social Security and they are taking 15% of that. He claims thats the limit and can live with that