1. What kind of business entity are you (corporation, partnership, sole prop, LLC ?
If you are a corporation, partnership or multiple member LLC, the IRS could technically assess the TRUST FUND PORTION of the tax against you personally. When they do this they usually assess you at a discounted 45% of what you owe in 941's. If you are a sole proprietorship or single member LLC, the IRS can assess the full 100% of the 941's against you personally.
2. Do you think your business can still thrive and stay open?
Should you decide to keep your business entity open (maybe by reducing your bottom-line expenses), resolving your 941 tax problem will usually take one of the following three shapes:
A. Installment agreement (or full payment ) with penalty waiver request
Your tax professional should be able to create a livable installment agreement for you to pay the liability -- an agreement that will need to be done creatively done to suit your ability to pay. Once the agreement is in place, you can request a waiver of penalties. Naturally, you can also FULL PAY the IRS and ask for penalties off then as well.
B. Offer in Compromise - uncommon but sometimes doable
It is rare, but the IRS might entertain an Offer in Compromise for a business that qualifies. Your business will have to be current on three consecutive quarters to put this in motion. You will truly have to hit the sweet-spot of being a financial hardship yet still solvent enough to stay current on future 941's.
C. Uncollectible status (CNC)
Like an Offer, CNC is rare, but possible for businesses that cannot make payments on the back taxes but able to stay current. If awarded, Uncollectible Status will stop all collections against the business indefinitely.
3. Are you ready to close the entity? (Either shut down completely or re-open as a new entity.)
Sometimes a liability is so huge and your business in such disarray, that it might be best to just finalize your entity. Particularly if you are a corporation, partnership or multi-member LLC, dissolution has potential benefits:
A. The IRS might not assess you personally.
B. IF the IRS assesses it against you, they'll do it at a discounted 45% rate (roughly) much less than 100%.
C. If you are a sole proprietor they could assess 100%, but then again they might, MAYBE, not assess at all either.
Going Away Forever
If you are not satisfied in your trade and need an entirely new beginning, the entity and your enterprise can be finalized forever with the above benefits of zero or partial assessment.
Reopening as New Entity.
You can transfer your skill set and assets to a new entity BUT with a HUGE caveat:
A. Any assets of the closed business are "in theory" NOT YOURS but the IRS's possession. Be sure to keep a list of your assets and their "quick-sale" value on the last day of business and/or what you transfer into a new entity. The IRS might want to know their value and want a payment equivalent to the value of those assets if they decide to scrutinize your closure.
B. Avoid pyramiding -- which is illegal and criminal. Pyramiding means creating new liabilities in new entities and then closing those entities to avoid assessment. If you pyramid, the IRS might throw the Department of Justice at you and that's no fun. So, if you are going to create a new entity -- be sure to pay your payroll taxes.
