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Jax Tax
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1376
Experience:  JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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I owe back federal taxes and state taxes. If I start a limited

Customer Question

I owe back federal taxes and state taxes. If I start a limited liability corp., can the IRS seize bank accounts for the company for past personal taxes?
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.

Hi and welcome to Just Answer!
Yes - the IRS may and most likely will levy on your bank account even if it is opened under the name and tax ID of your business.

To avoid levies - you need to set an installment agreement with the IRS and keep it current.

 

To request an installment agreement - you should send Form 9465, Installment Agreement Request. You will be charged a onetime user fee of $105.00.

The IRS has a different procedure if you have more than $25,000 in combined tax, penalties, and interest may still qualify for an installment agreement, but a Collection Information Statement, Form 433F may need to be completed.

 

In most cases, the IRS will not accept an OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (RCP). The RCP is how the IRS measures the taxpayer’s ability to pay and includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. The RCP also includes anticipated future income, less certain amounts allowed for basic living expenses.
Negotiation of an Installment Agreement or an offer in compromise is often difficult and requires substantial knowledge about IRS guidelines and regulations - and most likely you need someone to represent you with the IRS.

I suggest contacting a local CPA or Enrolled Agent and he/she will evaluate your situation and estimate a reasonable offer.


Let me know if you need any help or clarification.

Expert:  Jax Tax replied 2 years ago.
I agree that the debt needs to be resolved however, the IRS cannot levy the accounts of the LLC.
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1376
Experience: JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
Jax Tax and other Tax Specialists are ready to help you
Expert:  Jax Tax replied 2 years ago.
The account is protected under what is called the charging order.
Expert:  Jax Tax replied 2 years ago.
So long as the account is in the name of the LLC (you can be listed as signator just not on the account) and under the business EIN it is protected. You will want to ensure you do not pay personal expenses from this account. Transfer money from this account to your personal account first and keep track of distributions. If the IRS wants these funds it would have to send a levy to the LLC to levy your distributions. If you do not comply, they can assess the business then levy. Or if they see personal expenses they can levy under a nominee or alter ego determination but the process is lengthy.
To answer you question, business accounts and assets are protected, but you will want to resolve the matter with the IRS. The above informational is good regarding this area. I suggest the 433f and installment agreement but first make sure you have fixed the problem with owing. Make your estimated tax payments. If you don't stop, the IRS will do nothing but levy and seize assets.
If you owe more than $100k, you need form 433a as procedure has just changed where by all accounts over go to a field revenue officer.

Customer: replied 2 years ago.
Would the installment agreement have to be in place first?
Expert:  Jax Tax replied 2 years ago.
First? First before what?
Customer: replied 2 years ago.
Before creating LLC
Expert:  Jax Tax replied 2 years ago.
Oh! No.
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1376
Experience: JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
Jax Tax and other Tax Specialists are ready to help you

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