Filed for a LLC EIN and 1099'd workers in the first year. the IRS did an audit and found that we did not 1099 ...

Asked about 2 years ago - Los Angeles, CA

enough people that were paid over $600 that we missed in our 1099's, so they charged fees and penalties about 10,000. I said BS im not paying this and walked away, that was many years ago. Now a bill came up as a levy on an old bank account of mine personally, lovely scumbag collection tactics, thats what we get for attempting to be compliant and snitch on our workers. Anyway, they said if we can prove that the 1099'ers in question filed returns then the amount would be alleviated. How do I make this go away with little or no payment? Need help, not preachers, will pay for legal service.

Additional information

The LLC was originally set up as a single member when applying for the EIN, but the tax return was filed as corporation and three members, this was just a mistake in filing for the EIN but the tax return was filed as Corp with three members. the argument from IRS was that 1099's were filed properly, not an issue of reclassifying 1099's to W-2's in other words. Their argument was that we simply forgot to 1099 10 or so people that should have received 1099's.

Attorney answers (3)

  1. Phillip Monroe Smith

    Contributor Level 18


    Lawyers agree

    Answered . There are two strategies that come up for me. Ist seek a penalty abatement based upon reasonable cause, and ask for a suspension of collection action until the abate request is granted or denied. Second, contact the former workers and determine who many have filed returns, and are willing to disclose that they have file.

    You need to understand the policy of the IRS in order to understand why they enforce the penalty. The IRS doesn't want individuals failing to pay their fair share of taxes on "underground income," and they don't want employers assisting them. I have been successful in assisting to resolve these cases when the employer puts aside his resentment of the IRS, and seeks to resolve the matter.

    Good luck!
    Phillip M. Smith Jr.
    Los Angeles Tax & Business Attorney
    Call: 323-292-4116 or 562-505-1004

    THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can... more
  2. Curtis Lamar Harrington Jr

    Contributor Level 20


    Lawyers agree


    Best Answer
    chosen by asker

    Answered . In addition to Mr. Smith's good advice, I also bring up these possibilites...

    If the corp or LLC is the employer (not a sole proprietorship), it could possibly bankrupt out of the problem. Even the threat might be enough to withdraw this $10k.

    Bank levy is also harmful in that it may apply toward later years rather than earlier years.

    You didn't say if this was limited to one year.

    You didn't say how much was taken from the bank.

    Once the bankruptcy option is examined (above) then you might look to Offer in Compromise, depending on "how badly" your business is doing. If you are destitute enough, and Offer in Compromise might work -- see my article on the analysis below.

    Barring this, you may have to use the notice of Levy (if you received it) to ask for a due process hearing to start the machinery for tax court & appeals. (See IRS link below)

    Please remember to designate your question's BEST ANSWER.

    Please remember to designate your question's BEST ANSWER.

    Curt Harrington
    (562) 594-9784
    Visit the Library:

    Curt Harrington Patent & Tax Law Attorney Certified Tax Specialist by the California Board of Legal... more
  3. Paul Arnold Nidich

    Contributor Level 12


    Lawyers agree

    Answered . You don't say whether your LLC is a single member or a multi-member. You do say that the LLC is a disregarded entity.That means either it is a single-member LLC being taxed as a sole proprietorship. If that's the case, you are personally liable for this mess. If the LLC is a multi-member, then it filed a partnership information return and gave K-1s to the partners to claim on their individual return. Your personal liability may depend upon whether you did certain business activities, like signing checks.

    You sat you want help, not preachers. The IRS would offer you a guaranteed installment plan, if you contacted it. I usually don't accept clients with this small amount of IRS debt, because my fees would defeat the purpose of hiring an attorney, when you can do it yourself.

    On the other hand, if you're willing to pay an attorney $25,000 or so to avoid paying IRS $10,000, more power to you (and the attorney who earns the fee).

    Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each... more
Avvo instant logo@2x

Need an answer to your questions within 15 minutes?

  • 30-minute phone call
  • Ask any questions
  • $99 flat fee
  • Money-back guarantee
Talk to an attorney now

Can't find what you're looking for?

Ask span5@2x

Ask a question on our public forum.

Ask a lawyer
Instant span6@2x

Have an attorney contact you privately.

Right now.

Icon lock@2x
Secure conversation. Your details remain between you and your attorney.
Icon clock@2x
Get an answer guaranteed. Be assured that a lawyer will contact you to help with your legal issue.
Start your session now