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archergammi · Sep 4, 2008, 08:05 AM

WE owe past 941 taxes on a business that was dissolved in 2001. Do these taxes ever go away? I think a tax atty told me they had a 10yr life, then fell off.

Plus, we are 3 yrs from retirement, and are wondering if these taxes will impact our social security payments? They currently keep all refunds, etc. We have been classified since 2001 as uncollectable. We also have small 401K, can they take this when we retire?

Thanks
archergammi

AtlantaTaxExpert · Sep 4, 2008, 09:19 AM

Archer:

As long as the tax debt is owed and payments are being made (your confiscated refunds are considered to be payments), the tax debt will remain active and will NOT go away.

I currently have a client who has owed about $15,000 to the IRS since the late 1990s. The IRS also has declared her debt uncollectible, and they confiscated her refunds every year just like you.

I have told her that, even though the IRS will NOT try to garnish her small salary as a receptionist or her Social Security check, the debt will never disappear. Once she stops working and the refund check "payments" stop, then MAYBE the debt will disappear after ten years. However, given her age and health, I suspect she will pass before that happens.

archergammi · Sep 4, 2008, 09:42 AM

Thanks so much for your help - can you also tell me about our 401K and Roth IRA? Will they levy on those?

Thanks again

AtlantaTaxExpert · Sep 4, 2008, 09:45 AM

They CAN levy the 401K and/or the Roth IRA UNLESS the Form 941 back taxes is for a corporation of some type.

Whether they do or not depends on how much the 401K and Roth IRA assets are needed to maintain your standard of living at retirement to a certain minimum level.

I suspect that the IRS has already investigated this option and have determined that your 401K and Roth IRA are needed to keep your standard of living above the poverty level.

If not, the IRS would have levied these accounts long ago.

Given the AGE of the tax debt, you may want to investigate the option of declaring bankruptcy. Old tax debts CAN often be forgiven under bankruptcy.

archergammi · Sep 4, 2008, 02:23 PM

Sorry to ask so many questions, but this is very important to our future. The 941 was partly for a sole proprietership, and partly for an llc.

We also have a retirement home that we have never had in our names. Should we keep it that way to keep it from being taken upon our deaths?

Thanks so much.

AtlantaTaxExpert · Sep 5, 2008, 08:15 AM

I would keep OUT of your names as long as you owe these taxes.

archergammi · Sep 6, 2008, 09:55 AM

Thank you so much for all your help. We have been under this for a long time. Can 941 be dismissed by bancruptcy? We considered it a few years ago, and never pursued it.

AtlantaTaxExpert · Sep 8, 2008, 10:43 AM

You need to consult with an EXPERIENCED bankruptcy attorney to determine if your employment taxes can be dismissed.

For years, I thought back taxes could NEVER be dismissed via bankruptcy. Then I had a long and in-depth conversation with a neighbor who happened to be a law professor, and he enlightened me that back taxes can, in fact, be dismissed via bankruptcy.

We did not go into detail about the mechanics of the process, but it IS possible, and, in your case, worth pursuing In my opinion.

archergammi · Sep 9, 2008, 08:13 AM

In reference to your comment about incorporated vs sole proprietership, does that mean they can't levy for corporate taxes? We did have the last few years in an LLC. I will take your advice and get a good bancruptcy attorney-it would certainly be worth not having this hanging over our heads anymore.

AtlantaTaxExpert · Sep 10, 2008, 10:25 AM

If properly established, the corporation is a separate legal entity for both business and tax purposes. Hence, the shareholders of the corporation are NOT LEGALLY LIABLE to pay any back taxes for the corporation.

However, the top corporate officer CAN be held liable if the IRS determines that he failed in his fiduciary responsibility as a corporate officer.