Mixing Corporate and Personal Liabilities in an Offer in Compromise

In my last blog I discuzssed this scenario for the situation where the company is unincorporated.  This week we look at a small corporation where one or two people own all the stock.  This analysis will usually also apply to an LLC or LLP.  First, if the corporation is still in business, two separate Offers will need to be filed.  This is

 

because the corporation is a legal “person”, separate and distinct from the individual owner.   However, in all likelihood, the shareholder’s personal financial situation will be assessed for both Offers.  Therefore, we would decide the total amount to offer and then divide that amount between the two offers.  If the corporation has gone out of business, the shareholder would not owe all of the unpaid payroll taxes, but only the Trust Fund portion, which is the actual amount of federal income tax withheld from the employees’ paychecks.  The Trust Fund penalty is a personal debt of the taxpayer.  In this situation, the shareholder/taxpayer would file one Offer, because the entire liability has become her personal liability.