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Under
the right conditions and if performed properly, a New Company Startup
(Newco) is generally a more favorable alternative to bankruptcy in
the case of money owed to the IRS and/or other creditors.
In
brief, the strategy calls for a newly created entity (NEWCO),
generally a corporation, to purchase the assets of the tax burdened
company at "net auction value" effectively from the IRS.
The new business will generally assume the taxpayer’s business
name, phone numbers, company logos, and the like as well as hire its
employees to avoid a loss of recognition in the community. Upon
payment of the net value of the assets being purchased, the IRS will,
in turn, issue a discharge of any tax lien that has been filed
against those assets allowing NEWCO to avoid any successor liability
claim. Unsecured creditors of the old company are notified of the
liquidation in favor of the IRS and that there are no assets left for
distribution. Secured creditors senior to the IRS retain their liens
and continue to be paid by NEWCO. It is common practice for
the IRS to impose a Trust Fund Penalty Assessment against the person
who was responsible and willfully failed to collect and/or pay-over
any withholding tax from employees of the old company. The Penalty
cannot be more that the amount of tax withheld from wages and not
paid over to the government. It does not include employer
contributions, nor does it include any of the interest and penalties
that have accrued due to the employer’s nonpayment. Depending on
that individual’s financial condition, the Trust Fund Penalty may
be satisfied through either an Offer in Compromise or long-term
installment agreement.
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