Welcome to the site. I'm PDtax
, and can add a few things to what the other Experts have offered. I hesitate to do that, but checked with one of the Experts, and he agreed my take was worth sharing.
What you have in mind requires some delicate restructuring, and under no circumstances should a non-professional operate directly with the IRS in matters like these. Do not take my advice. or that of the other Experts, and try to do this yourself. A tax pro, an Enrolled Agent, CPA or tax attorney specializing in tax controversy work is crucial.
The transfer of assets you suggest to an s corp, unless properly done, would be subject to IRS review/reversal, because the transfer could be considered a fraudulent conveyance. It is part of the solution that might work best for you, though.
Please confirm if IRS has filed tax liens
against you and your business. That is crucial in determining how to proceed.
Also, please review your personal financial condition, including income and assets. These tax debts are personal, but what you have to pay to the IRS and state will be limited to what you have. And, any negotiations after you restructure must be done concurrently to provide that both agencies agree with and accept the terms of your plan, not the other way around.
The reason is I like the transfer of assets into a C corp, not an S, so the old tax debts stop under the taxpayer's social. I like to sell the assets to the new entity in exchange for a note, which allows me to limit my income from the new corp for installment and/or Offer purposes. I don't mind disclosing any of this to the Revenue Officer, and as you can tell I've done this before.
Once the transfer/sale is done, now the taxpayer has note income which is the basis for his agreements. It's also not wage income, subject to wage garnishment.
This is a technique I have done with full disclosure to the IRS, and it has always ok with them because one of their guidelines is that in order to make any deal, they have to make sure that no new debts will accrue (on that EIN). A new entity allows the Revenue Officer to work the case, and sets you up for continuity, since the new entity does not owe any of the old taxes). The existence of a tax lien complicates, but does not make this impossible.
Again, no offense meant to the other Experts, but this is work for an experienced hand. Hiring a tax pro is crucial, and if I send you off to meet one with a few things to suggest, I will have answered your questions, and then some.
If you want me to assist any further, please ask for me by name in any response. I'm PDtax.