The IRS has an assessment called the Trust Fund Recovery Penalty which is used to assert a penalty to the responsible parties in a business when dealing with outstanding employment taxes. The IRS has a 3 year period of time to do this. The 3 year statute begins upon the actual filing of the return and original tax assessment. If the IRS misses this timeline, they cannot assess the taxpayer with the trust fund recovery penalty. I believe I have explained the trust fund previously in a different post. However, let me revisit; the 941 tax is made up of Federal Withholding, Social Security, and Medicare pulled out of each employees paycheck. The employer matches this amount as well. The Trust portion is the employee withheld portion only. Officers, shareholders, CFO's, Treasurers, and Partners can all be responsible for the trust portion of the debt. If held liable, liens will be filed, levies will ensue and other collection action will take place against the individual. Our client, by virtue of time, will be free and clear from the trust portion of the debt.
Our client ran a business and managed to incur a $302,000 liability to the IRS for employment taxes. These accruals took place over a 4 year timeline from 2003 up until 2007. The last ASED (Assessment Statute Expiration Date) expired on 4/15/2011. We estimated the trust portion of the debt to be around $180,000. Our client will no longer be responsible for paying this back or at risk for assessment.
We have managed to wrap up the old business, close it out, and save our client $180,000!!