Clients with Steep Tax Debt Get Creative and Settle Back Taxes

When a sign company contacted Omni Financial, they reported that they owed the IRS approximately $70,000 in back taxes. However, their actual situation was much worse.

When Omni contacted the IRS, they were informed that the client actually owed about $150,000, and had not paid their 941 tax since the corporation’s inception in 2002. The client had also not filed several 941 tax returns and was not current with its federal tax deposits.

The company was owned by two friends, who began working in the sign business directly out of high school. Unfortunately, because of the difficulty in operating a start-up business, the corporation was unable to pay its 941 taxes. During the initial call, the friends said they wanted to be set up on an Installment Agreement and obtain an abatement of penalties. They also emphasized the importance of keeping their business, because it was the only type of work that they had ever done.

After Omni spoke with the IRS, the Revenue Officer stated that she would withhold from any enforced collection so long as the business became current with its federal tax deposits and provided financial statements. The client made its next federal tax deposit, and remained current with its tax deposit requirements. Their financial statement, however, showed that the business was in the red, and could not afford a payment plan. The personal financial statements showed that neither friend had any personal assets. One lived in his mother-in-law’s house with his wife and three kids, while the other lived in the basement of the same house.

After Omni reviewed the financial statements with the clients, they determined that there were several ways in which the company could save money. After discussing the situation with the clients, Omni proposed to the IRS that the current corporation close down and sell its assets to a new limited liability company owned by the friends. After numerous negotiations with the Revenue Officer and the Group Manager, the IRS agreed to the proposal.

The friends then formed a new company, and implemented the changes recommended by Omni, thus making the company viable and saving an extra $3,000 per month.

In addition, the Revenue Officer agreed to apply the money from the sale of the assets (Certificate of Discharge) to the trust fund tax. As a result, the client’s tax liability went from $202,000 to $53,000 of trust fund tax.

Most importantly, the friends were able to keep their business. The clients paid Omni a total of $13,000, and saved over $150,000 on the tax liability. Because of the shut down of the old corporation, Omni was also able to negotiate several favorable resolutions with the company’s creditors.

If you own your business, it can be difficult in hard times to deal with back taxes. Learn more about how Omni Financial can help you deal with your tax debt.