In-Business Offer In Compromise

In general, Offers in Compromise are not encouraged or accepted for on-going businesses.  The tax debt arises from unpaid payroll taxes and/or unpaid corporate income taxes.  If a business is closing or has just closed, the IRS will consider an Offer in

 

Compromise based on remaining assets and outstanding accounts receivable.  In the case of unpaid payroll taxes, the IRS will then seek out “responsible parties” on whom to assess the Trust Fund Penalty, thereby collecting more of the tax than can be collected from the corporation.

For an ongoing business making a profit, the only possible Offer In Compromise is an “in business” Offer.  This is one where the entire amount of the tax will be paid over time but a compromise is accepted on the interest and penalties owed.  This can still be a considerable savings for the company.  The other requirement is that the business must remain current on all ongoing taxes owed and these ongoing taxes usually must be paid directly to the revenue officer assigned to the case.  The IRS will still usually assess and collect the trust fund penalty against those who can be shown to be responsible parties, such as officers, directors and managers.  In this case, one should seek professional guidance to ensure that the primary collection is against the corporation and not from the Trust Fund portion.