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Phillip B, EA
Phillip B, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 704
Experience:  Practicing since 2004. Expert in 1040, small business, represent vs. IRS, & int'l tax mattters.
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I recently was audited and the IRS decided that I owed them

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I recently was audited and the IRS decided that I owed them some money. I disagree with them but they are very hard to argue with. I have been trying to negotiate a payment arrangement with them but so far they haven't accepted an offer nor have they come back with a payment that they will accept. They are just getting more aggressive with their threats. I have never been through this before and let me tell you, it is a drag.

I am self-employed and have been all my life. I don't really have any assets for them to take. My business has lost money the last few years with the economy so I am struggling just to pay for food.

My daughter and I recently started a company and set it up as a C-Corporation. I hope to get my financial house back in order. I have two questions.

First, do I need both an Employer Identification number and a Taxpayer Identification Number? I think I just need an EIN.

Second, when I provide my SS# XXXXX the application for the EIN as the CEO, do I put my daughter's assets at risk in any way. I don't think they can come after the corporation (although I am sure they can garnish the $500 in wages I will be paying myself). I just don't want to put my daughter at risk.
Thanks for using JustAnswer.com!

I am sorry to here about your tax situation.

First, if you haven't already, I'd like to recommend hiring a representative. If you handled the audit yourself, there is a good chance that you may have been railroaded. If there are any changes made to your return that were not correct, you can write to the IRS to request an Audit Reconsideration. An expert would be very helpful in reviewing your audit and letting you know if they can appeal the audit results in a successful manner. I would recommend finding an enrolled agent (they usually charge lower fees) in your area.

On to your first question. You do need a Employer ID number if you are operating your new business as a C-Corp.

2.) Your daughter's assets would only be at risk with the IRS if the new corporation doesn't file and pay payroll taxes on time and in full. To help prevent issues like this, I would recommend setting up payroll services that will take care of payroll tax payments and payroll tax return filing.

If there are other questions, please reply to this answer so that I can assist you further. If this answers your question, please rate my performance between OK and Excellent Service so that I can be paid. Thanks for your business.
Customer: replied 4 years ago.

The problem with working with an Enrolled Agent is that, unlike an attorney, nothing you say to them is confidential. The IRS can compel them to testify against the client. I used one years ago. They discovered that I had handled something improperly on my taxes and threatened to turn me in and collect what they called a "reward" from the IRS. It was an honest mistake. I amended my return and sent it back to the IRS with an explanation for the error and there was no penalty. I have never trusted accountants and enrolled agents since that day. I go to a tax professional to help me solve problems not to threaten me.


 


When I give the IRS my SS# XXXXX the IRS with my application for an EIN, am I exposing myself to any other specific risks? My brother, an attorney, tells me that they won't be able to come in and take assets from the corporation. I presume that all I am doing is guaranteeing the payment of employment taxes and corporate taxes as any corporate officer would.

I'm sorry to hear about your experience with that EA. He may actually have been violating their code of conduct with that kind of behavior. When an EA represents you, they have privilege unless they prepared the return or the issue has become a criminal matter.

With an SSN on a SS4 there are no specific risks for taxes issue of the corporation or from other shareholders. However, the person with the SSN will likely be deemed a responsible party by the IRS if the corporation falls behind on payroll taxes. If the corp falls behind on payroll taxes, the IRS could pursue people that are deemed as "responsible parties" for back payroll taxes. So yes, in a way the owners guarantee the payroll taxes are filed and paid on time. As long as the corp stays current on payroll taxes, owners, employees, and directors of a corporation cannot be personally liable by the IRS (or states for that matter) for tax debts of the corporation of of other shareholders.

Let me know if there is anything else that I can do for you. If this answers your questions, please rate my performance. Thanks
Customer: replied 4 years ago.

I am the only employee of the corporation and I understand that I have to keep current on the taxes. I just wanted to be sure that my personal tax situation wouldn't affect the corporation since there is more than one person involved with it. I don't want my situation to tie them up at all.

Your situation should not create any issues for the corporation. I apologize I wasn't as clear as I should have been. Thanks for the opportunity to serve you.
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