If your business owes 941 taxes, here are the most important questions you and a tax professional need to discuss to bring your case resolution:
1. Is the IRS actively pursuing you?
Most cases with due balances higher than $25,000 are going to get the attention of an IRS field officer. You will receive a notice or business card drop-off from an actual person in your area whose job is to pursue you for the tax debt. That person will either mail you a letter or have an actual visit to your business. Once you hire a tax professional they will be able to take the Power of Attorney or form 2848 on your behalf and speak to the Revenue Officer going forward. If you are assigned a Revenue Officer, a couple of options to resolve your case are going to be off the table. If you are a corporation, you will almost certainly be assessed trust fund taxes against yourself personally. You will not be able to avoid that assessment in most cases. And if a Revenue Officer is assigned, you are going to have to come up with a plan to resolve the debt.
2. Do you want to keep your business open? Is it viable?
This question might be most important if the IRS hasn't assigned anybody to your case yet. If your business has no chance of turning things around, it's time for you to finalize your entity and shut down. By doing this, you might avoid personal assessment of the taxes against you, regardless of whether your business is a sole proprietorship or corporation. (More on that distinction here.) Your tax professional should help you finesse the closure of your business to minimize the damages.
On the other hand, your business might actually be viable but so buried in debt that it's time for you to separate your trade and skills by closing the entity but setting up a new entity and starting over. (Do also realize that if you do set up a new entity you must stay current on payroll taxes. Otherwise the IRS could pursue you criminally for "pyramiding," i.e., opening and closing businesses with unpaid 941 debts over and over.)
If you truly want to keep your business open and believe in its destiny, then you will need to negotiate either a payment plan, uncollectible status, or an offer in compromise. More on these options in another post.
If your business is delinquent on 941 taxes, call me (Marty) at my desk at 1-866-525-7324 or email me at [email protected].