Payroll Taxes

[bates888]

Hello,
We received a discharge on our no asset Chapter 7 case in September. The case is also closed. In the BK, we included payroll taxes for our LLC and our Corp (we had 2 businesses that went under). The total owed is probably like $4k between the two, but they've added penalties and fees so now it's up to $8k.

Both businesses are dissolved and no longer operating. I thought we were in the clear until the IRS called last week. They still want their money. My attorney originally told me that the IRS is far behind in their paperwork. Maybe they haven't received our discharge yet?? Any ideas on how to handle this. I've called our attorney, but I'm still waiting for a call back.

Any help is appreciated.

[HHM]

Payroll taxes are NON-DISCHARGEABLE, period. You will need to pay.

The only question is how much you are liable to pay. When it comes to payroll taxes, there can be a difference between the companies liability (now defunct) and the personal liability of the owners or responsible parties. However, it will take too much to explain everything here. Research "Trust Fund Recovery Penalty"

Bottom line, you will need to pay as payroll taxes are non-dischargeable debt, the open question is how much.

Best course of action, inform the IRS that the companies are dissolved, and try to work something out.

[bates888]

Thank you for the response...
I got through to the IRS again. Of the nearly $8,000 we owe, $3,000 is a civil penalty for not receiving a W2 or W3. We are sending that out today and that will be removed from our balance. Then they said we owe $1100 for our LLC and $490 for the Corp. Those are the trust fund dollars.

The total amount is $2300 for the LLC and $1900 for the corp with fees and penalties.

After reading around this post:
"1. You cannot discharge 941 taxes in BK, period. The IRS has 3 years to assess the Trust Fund Recovery Penalty (i.e. hold the responsible person liable, usually the owners) for the withholding portion of the 941. However, you can only be held personally liable for the principle withholding amount (i.e. Employee Withholding, SS, Medicare, Medicaid). You cannot be held personally liable for the Employer Matching portion of the 941 amount nor for the penalties and interest."

It looks like I'm only responsible for the trust fund amount. My question is - how do I get the IRS to accept that? I'd gladly send them the trust fund amount in full today if they can assure me that they'll waive the fee/fines/penalties.

Any advice?

[HHM]

There should be no penalties (fines or fees), the Trust Fund portion simply consists of the principal tax minus the employers contribution. The interest and penalties die with the companies.

The thing is, before you can pay the Trust Fund Penalty, the IRS needs to assess it. That can take some time.

[bates888]

Right, he did tell me it would take them a couple months to get back to me.

Sorry, last question. After I pay the trust fund penalty, they cannot take future personal tax returns to apply to those fees and penalties, correct?

[HHM]

Correct.