Checking Personal Liability in Company Tax Debts

Is the IRS closing company tax debt cases too soon? The latest report from the Treasury Inspector General for Tax Administration (TIGTA) declared so. About 15 percent of the cases studied by the organization were closed too soon by IRS employees as “currently not collectible” or CNC-defunct when the company had gone out of business already.

The closures were approved by managers even if the IRS employees did not accomplish all the required steps (research and request for financial information, primarily). Another staggering finding was that several corporations were already out of business before getting assigned to an IRS officer.

Think You’re Off the Hook? Don’t Be so Sure.

According to an IRS commissioner, CNC-defunct closures are ultimately done so that the agency’s efforts can be focused on earning revenue from cases where collections will be more productive. However, the officer noted that although these cases are removed from active inventory, collection can still be pursued in many cases when the statute of limitations is yet closed.

The IRS also notes that they are more aggressive when it comes to employment tax delinquencies where there could still be personal liability. For instance, you owned a small business that went under, and you failed to withhold taxes or submit those taxes to the IRS, you would be personally responsible for rectifying the mistake (by paying the IRS back with interest and penalties). It would be best to consult a tax attorney to guide you if you’re sued by the federal agency.