An OIC (Offer in Compromise) is a fix you may think about in solving your IRS problems.

Pros

• If you have tax debt, this program allows a deal with the IRS to pay the amount that you can afford while the rest is pardoned. You will have zero tax debt to settle and you can start over.
• Wages and assets cannot be seized during review, significantly lessening your stress.
• When the OIC was accepted and you have paid the balance negotiated, the IRS has to release tax liens in thirty days. Filed as public record will be a Notice of Release of Federal Tax Lien. Your credit rating should improve.

Disadvantages

• For one year, your OIC will be public record. This means that anybody can have access to your information, which does include your finances. This might be an issue in the future. If the IRS does not accept your OIC, information remains confidential.)
• When the IRS accepts your offer, provisions of the IRS Code needs to be complied with for five years.
• The 10-year statute of limitations for collecting taxes is extended from the time the Offer is pending plus 60 days when you submit an OIC. Even if your OIC is rejected, this extension takes effect. It may take the IRS one year to review an OIC. The good news is if it takes the IRS over 2 years to review your OIC, it’s deemed accepted!
• With the acceptance of the OIC, you agree to not question or appeal your tax liability.
• You lose all tax refunds you might be expecting the calendar year the IRS accepts your offer, including interest for that period.
• Disclosure of your full financial history is needed, which might cause more audits if they find that you were hiding something.
• Your tax debt plus penalties and interest will be reinstated in full if you default on your OIC, not including the payments you’ve made.

When you’re a business owner, you must withhold taxes from your employee’s paychecks every pay period. These taxes are for federal (and possibly state) income tax and FICA contributions (Social Security and Medicare). The number of exemptions each employee claims is the basis for income tax withheld. A party of the employee’s gross earnings goes to FICA contributions. You must match the FICA amount partially or fully. A bank accredited as a depository for federal taxes is where the money is turned over. The payment should be accompanied by a federal deposit form.

Business owners have to pay these taxes to the IRS, whether monthly or quarterly, dependent on the size of the payroll. What is actually happening here is that your business is a collecting agent for the government. Your employee’s taxes are entrusted to you until you make the payment.

The IRS also requires business owners to submit:

• Form 940 (Employer’s Annual Federal Unemployment Tax Return) yearly. This reports your total quarterly payroll tax deposit. This deposit amount determines the federal unemployment tax. This tax is paid by the business. This tax doesn’t come out of the employee’s paychecks.
• Form 941 (Employer’s Quarterly Federal Tax Return) every 3 months. This form reports the figure of your employee’s federal income tax and FICA that was withheld the previous quarter.

Most business are neglectful in paying and filing employment taxes, according to the IRS. It’s considered that a business that has not paid taxes as illegally borrowing funds from the U.S. If you need to pay tax debt, revenue officers can close your business and seize assets.

Pay Uncle Sam first – make settlling taxes a priority to minimize your business’ payroll tax problems. Utilizing a bonded payroll tax service is an option to think about. The service takes care of filing and making payroll tax deposits. The penalty for late forms or late payments are paid by the service.

If you are a a business owner who was unable to pay payroll taxes or paid your taxes late, you have probably been served a notice about non-receipt of your 941 payroll returns from the IRS.

It may seem like a good idea to hold off settling payroll taxes or to file payroll returns late if your business is having issues, but it isn’t. You’re adding IRS problems to your already growing problems and basically paying other debts with your employees’ hard-earned money.

Payroll Taxes

Your business’ cash flow problems will be increased if you fail to file payroll taxes on time because penalties and interest are accruing on your tax bill.

Failing to File Payroll Returns

Failing to file payroll returns when it’s due increases the penalties that the IRS attaches to them. These penalties may range from 5% per month up to 25%. Your tax issues are multiplying since the interest is compounding and penalties are adding up.

If you’ve received notice from the IRS regarding your payroll tax problem, contact us now. Dismissing this issue will only make it worse. The IRS utilizes enforced collection for entrepreneurs with payroll tax issues. Your business’ bank accounts, equipment, accounts receivable, and cars may be levied. You might end up out of business.

What happens now?

If the IRS has determined that you are accountable for the non-payment or late submission of payroll taxes, you are liable for the payroll taxes plus any penalties and interest that accrues. Suffice to say, you’ll be paying a Trust Fund Recovery Penalty.

Options

Assistance is what you need. Know your rights and a few other things, including if assets are likely to be seized, or if you can qualify for an Offer in Compromise or installment agreement, or even if the IRS assessed the correct amount.

You and your family can be stressed from IRS issues. You’ve labored all your life to be able to have a nice home and a car. Now they could be taken away by the IRS. You have received a notice stating that they are going to seize your properties to pay off the back taxes you owe. They can do this. They can seize your home, car, and even your pension.

Though most assets may be taken to pay your tax bill, there are some that are exempted, such as:

• Furniture, food, fuel, and personal effects as much as $2,500
• Clothing and books for school
• Undelivered mail
• Tools and books that are job related up to $1,250
• Certain annuity and pension benefits, such as Retired Serviceman’s Family Protection and Survivor Benefit Plan, Special Pensions for Medal of Honor awardees, Railroad Unemployment Insurance Act, and Railroad Retirement Act
• Certain service-oriented disability payments
• Worker’s compensation, job training, public assistance, and unemployment benefits
• The minimum amount exempt from a levy on wages, other income, and salary
• Deposit to the special Treasury Fund made by Public Health Service employees and members of the armed forces who are on permanent duty overseas

Notice that the list says “certain annuity and pension benefits”. They’re not exempted from seizure totally. The larger the amount you need to pay to the IRS, the higher the risk is to your pension.

Normally, assets are seized in this order:

1. Checking and savings accounts
2. Vehicles – airplanes, automobiles, boats, luxury vehicles
3. Life insurance
4. Accounts receivable
5. Stocks and bonds
6. Wages
7. Collectibles
8. Real estate – vacation and investment
9. IRAs, Keoghs, and pensions
10. Your home

Pensions are low priority.

The IRS only seizes enough to pay the bill, though you should consider that interest and penalties are compounding on top of it. With no other assets present to cover the liability, your pension is at risk.

The IRS determines if your tax return was prepared right through a correspondence, face-to-face, or field audit.

Every tax return filed is examined through the Discriminate Function System or DIF that compares your deductions with averages. You are likely to be audited if your DIF score is more than average.

Conducted by mail, a corresnpondence audit will have the IRS asking for additional information about certain items on your tax return. The IRS may ask you to submit documentation to support your tax return, so promptly comply by mailing the documents through certified mail, but don’t send the originals to the IRS.

In case the notice states that you need to pay more taxes because of an error, compare the tax return with the information on the notice first before paying the amount required. The IRS can miscalculate what you need to pay or enter data incorrectly, too. If you disagree with the additional tax, you have to appeal in writing in 60 days.

You’ll be asked to appear in the auditor’s office (face-to-face audit) or you will be visited by the auditor (field audit). If you do not want the auditor in your office, show that his presence will be disruptive to business. The premises of the tax professional who submitted your tax returns is also an ideal place to perform the audit.

Professional tax preparers (enrolled agents, CPAs, and lawyers) who prepared your tax returns may attend the audit instead of you.

Unnecessary disclosure of information should be avoided. Documentation that were not initially required should not be presented and questions that are irrelevant to the tax return audited shouldn’t be answered. Divulging too much may cause the IRS to investigate you more, so give short answers and less explanations.

After the audit, you’ll receive a copy of the auditor�s report. You can appeal to the auditor’s supervisor on the spot if you do not agree with the outcome. You may appeal to the IRS Appeals Division in thirty days if the supervisor does not agree with you. If you’re still unhappy with the result, you may take the appeal to Tax Court.