Background:
Contractor company employs over 150 union tradesmen. However, between union benefits, dues, and routine payroll, the employer amassed well over $1 Million in unpaid liabilities, including a substantial payroll tax debt.
IRS began a federal tax levy against the contractor’s receivables. The ongoing levy further interrupted payroll and union payments. The levies also limited the owner’s cash draws, and his home mortgage neared foreclosure. If the levies continued, payroll would have ceased, and the business would be forced to close.
Actions Taken:
The first step was to stop the IRS levy. We arranged a temporary volunteer tax payment, a minimal amount, to satisfy the IRS’s need for case progression. We demonstrated to the government that an immediate, substantial tax payment would force the business to close and dissolve forever. So instead of collection enforcement, the IRS allowed us sufficient time to reorganize the payroll and union benefit payments.
Foreclosure was also significant threat. The owner had significant equity in his home, and the home was still occupied by his family. We intervened with the mortgage lender, seeking an alternative to foreclosure.
The owner was subject to also paying part of the tax personally. The IRS also sought a determination of responsible person for the Trust Fund penalty. To enable cooperation from IRS, the owner willingly accepted the determination. This cooperation allowed us to unify the collection actions taken against the owner and the business. Therefore, IRS would not seek separate payments from both the business and the owner.
After approximately 12 months, the contractor company began a formal installment agreement, with moderate payments to IRS. The payment was based upon the company’s revenues, less operating costs and payroll, union benefits, and a reasonable (but reduced) owner salary.
Result:
The business continues today, with a manageable IRS payment. Also, because of the immediate relief from IRS collections, the owner was able to avoid foreclosure, and protect his equity. The owner eliminated some unnecessary, personal extravagant expenses. Additionally, while the owner’s compensation was somewhat reduced, that compensation was also formally structured as a salary. This restructuring enabled a permanent deferral of the Trust Fund Penalty, because the owner no longer had the excessive compensation.