Thanks for this, consider me another strong disagreement + strong upvote.
I know a nonprofit which had a tax issue—they were financially able and willing to pay, but for complicated reasons paying would have caused them legal damage in other ways and they keep kicking the can down the road until some hypothetical future when these are solved. I can’t remember if the nonprofit is now formally dissolved or just effectively defunct, but the IRS keeps sending nasty letters to the former board members and officers.
Do you know anything about a situation like this? Does the IRS ever pursue board members / founders / officers for a charity’s nonpayment? Assuming the nonprofit has no money and never will have money again, are there any repercussions for the people involved if they don’t figure out a legal solution and just put off paying the taxes until the ten year deadline?
(it would be convenient if yes, but this would feel surprising—otherwise you could just start a corporation, not pay your taxes the first year, dissolve it, start an identical corporation the second year, and so on.)
Also, does the IRS acknowledge the ten-year deadline enough that they will stop threatening you after ten years, or would the board members have to take them to court to make the letters stop?
(it would be convenient if yes, but this would feel surprising—otherwise you could just start a corporation, not pay your taxes the first year, dissolve it, start an identical corporation the second year, and so on.)
This (a consistent pattern of doing the same thing) would get you prosecuted, because courts are allowed to pierce the corporate veil, which is lawyer-speak for “call you out on your bullshit.” If it’s obvious that you’re creating corporations as a legal fiction to avoid taxes, the court will go after the shareholders directly (so long as the prosecution can prove the corporation exists in name only).
Thanks for the response. This goes far enough afield of my expertise that I don’t think I can give very helpful answers to your specific questions. I don’t have any experience with corporate tax refusal of this sort. In the very limited anecdotal reports I’ve seen, it seems like the IRS is most likely to crack the whip and potentially pursue corporate officers when 1) the corporate entity fails to pay employment taxes (payroll/social-security taxes) after withholding them from employees’ paychecks, 2) when there’s actual fraud/dishonest filing involved, 3) when there’s no filing of required forms; in roughly that order of severity. I’m much less confident in anticipating the IRS’s behavior here than I am in the case of individual tax-nonpayers.
As far as the 10-year limitations deadline, again here I have much less information to go on for corporate taxpayers than for individuals. I know in the case of individuals, once the tax debt passes the “collection statute expiration date” it just sort of vanishes from the system and so they stop bothering you about it.
Note that if the corporate entity formally files for bankruptcy that this suspends the ticking of the statute of limitations clock until six months after the bankruptcy is resolved.
Thanks for this, consider me another strong disagreement + strong upvote.
I know a nonprofit which had a tax issue—they were financially able and willing to pay, but for complicated reasons paying would have caused them legal damage in other ways and they keep kicking the can down the road until some hypothetical future when these are solved. I can’t remember if the nonprofit is now formally dissolved or just effectively defunct, but the IRS keeps sending nasty letters to the former board members and officers.
Do you know anything about a situation like this? Does the IRS ever pursue board members / founders / officers for a charity’s nonpayment? Assuming the nonprofit has no money and never will have money again, are there any repercussions for the people involved if they don’t figure out a legal solution and just put off paying the taxes until the ten year deadline?
(it would be convenient if yes, but this would feel surprising—otherwise you could just start a corporation, not pay your taxes the first year, dissolve it, start an identical corporation the second year, and so on.)
Also, does the IRS acknowledge the ten-year deadline enough that they will stop threatening you after ten years, or would the board members have to take them to court to make the letters stop?
This (a consistent pattern of doing the same thing) would get you prosecuted, because courts are allowed to pierce the corporate veil, which is lawyer-speak for “call you out on your bullshit.” If it’s obvious that you’re creating corporations as a legal fiction to avoid taxes, the court will go after the shareholders directly (so long as the prosecution can prove the corporation exists in name only).
Thanks for the response. This goes far enough afield of my expertise that I don’t think I can give very helpful answers to your specific questions. I don’t have any experience with corporate tax refusal of this sort. In the very limited anecdotal reports I’ve seen, it seems like the IRS is most likely to crack the whip and potentially pursue corporate officers when 1) the corporate entity fails to pay employment taxes (payroll/social-security taxes) after withholding them from employees’ paychecks, 2) when there’s actual fraud/dishonest filing involved, 3) when there’s no filing of required forms; in roughly that order of severity. I’m much less confident in anticipating the IRS’s behavior here than I am in the case of individual tax-nonpayers.
As far as the 10-year limitations deadline, again here I have much less information to go on for corporate taxpayers than for individuals. I know in the case of individuals, once the tax debt passes the “collection statute expiration date” it just sort of vanishes from the system and so they stop bothering you about it.
Note that if the corporate entity formally files for bankruptcy that this suspends the ticking of the statute of limitations clock until six months after the bankruptcy is resolved.