Questions from Podcast series for Eric and the group – Pod No. 37 – Payroll Tax

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  • #13635

    Hey Eric,

    In the process of listening to your podcast series (really good, btw!) and it spurred a couple of questions:

    Payroll tax question: (Podcast No. 37) around minute 34 where you begin discussing options for dealing with the Payroll liability, and you mention “shut the business down and it gets reduced to the TFRP” –

    here is my question: the scenario you used in the pod describes a seemingly bankrupt company with little equity in the assets – but what about a situation where there are appreciated assets (i.e. a building and real estate) – in that scenario, when you “shut the business down” is there any way to strip it down to as close to the TFRP as possible, or does the amount of equity in this scenario condemn us to a minimum offer of maybe 80% of the equity for quick sale value?

    I am trying to offer this to the RO as a collection alternative, in order to give the taxpayer more time to find a buyer for Parcel No. 2, but if there is a strategy I am not seeing where I can get this as close to the TFRP as possible, that would be most appreciated. Thanks in advance!!

    As an illustration, this is what is left of the business: (Using simple round numbers) – the business filed its final 941 for 3rd quarter 2018 and all business locations are shuttered. Since business is shuttered, no ability to get a loan on this (i.e. no cash flow).

    Total remaining Tax, Penalties and Interest (Liens have been filed): 120,000

    TFRP Portion: 62,000

    Judgment Creditors (Liens filed in the Public Records): 20,000

    Mortgage on Real Estate Parcel No. 2 22,000

    Total Liabilities 142,000

    FMV Remaining Assets (total): 120,000 comprised of the following 2 Real Estate parcels:

    Building & Parcel No. 1 35,000 (a sale contract will be signed next week at this price, property has been appraised so there should be no problems with the lien unit signing off on this)

    Building & Parcel No. 2 85,000 (est. listed for sale; sale price based on comps, currently being appraised)

    #13827
    Eric Green
    Keymaster

    No, if there are assets with value the IRS lien would attach, but the IRS only wants the money, not the asset themselves. But here there really is no asset – the tax and judgment amounts exceed the FMV. I would close the business and sell the assets, with the proceeds going to the creditors.

    An alternative is to see if a “friendly buyer will come in and low-ball the amount offered. This way the assets get to someone friendly for a good price. The negative is that the taxpayer will still be left with some TFRP on them they will need to deal with.

    My thought is to sell the assets and get the government paid.

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