Livingston, MT asked in Tax Law for Montana

Q: Can IRS garnish shareholder's personal monies for corporation tax debt?

I received an IRS notice for penalties and interest for late filing of 2015 and 2016 corporate tax returns for a Montana close corporation. They incorrectly identified 2 shareholders so I wrote a letter explaining: there was 1 shareholder; I had erroneously been told by what I thought was a valid source that I did not need to file tax returns since the corporation had not conducted business for many years; I realized my error when the Montana DOR notified me of failure to file; and I immediately filed both state and Federal returns. I received a Notice of intent to seize (levy) your property or rights to property in a reduced amount of $4,697.98 (for a single shareholder?). The corporation is in good standing with the Montana SOS but has not done business since 2007. It has no assets, bank accounts or property. Is the shareholder responsible for this debt? If so, should I send a partial payment with an offer in compromise?

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1 Lawyer Answer

Linda Simmons Campbell

Answered
  • Tax Law Lawyer
  • Burlington, CT

A: It sounds like you were charged a failure to file penalty. Sometimes the IRS will abate the penalties once you have filed the required returns. I suggest filing a penalty abatement request. If that does not bring the debt down to an amount you can afford then you can try and submit an Offer in Compromise. The IRS has an Offer in Compromises tool on their website that you can use to see if you might be eligible.

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