Mom was a business owner and hid her dementia for years, all the while neglecting (literally forgetting) to pay the business taxes.

Need more infro, are you talking about IRS taxes, or other, such as she collected withholding for SS from her employees and did not pay the government what she withheld. Or was this a retail business and she collected sales tax and did not pay to the state?

Ok, this is bad, actually she could actually go to prison for this. The real biggie is that she deducted from employee's pay check and did turn over the funds to the government, now you have fraud, as since she did not turn over the money, the employees SS and so on was not credited to the employee, the government does not take kindly to this, and then there is the IRS. Yes, everything can have a lien placed against her assets, of any kind. My recommendation is to sit with an Enrolled Agent, it is the highest level of tax preparers, this person can represent your mother in court if need be. Do not go to H&R Block or one of those preparers, they, under no circumstance are qualified to handle this mess. Step one is to get her back IRS taxes filed...do not attempt to do this yourself. Has she been declared mentally incompetent? This is an important factor.

Don't know about this stuff but have heard that there are attorneys who are specialized in geriatrics. Since this was a dementia issue. Just wanted to put that out. Best of luck.

Oh boy, I'd get a lawyer involved asap if I were you. In Canada the fines can be worse than the unpaid taxes and kept growing until it was resolved, and they can even garnish part of your government pension for this.

Since this is federal taxes.....The IRS can garnish her social security, that much I know for sure. They can only garnish a small % though. The IRS can also seize her retirement account but that doesn’t mean they will. The IRS can seize her money. But again, no one can here can tell you what will happen for sure. Good luck, this sounds like a mess!

Pure and simple, it is Lawyer time. They may advise you make an appointment with the IRS with all the info you have. This is not going to be the first time this has happened and they will likely appreciate that it is not "on you" and that you are doing all you can to provide what you can. Bring all records you have of what she DID file, if anything, of what she kept records of, or anything you know. Yikes! Please update us how it goes.

Penalties and interest can be huge amounts but may be negotiable. I've been through a business tax audit. If I were in your shoes I'd spend the money to consult with a good tax attorney. Don't talk to the IRS without representation.

Of course it may be different with the IRS, but in my experience tax officials can tell the difference between a habitual chancer/rogue and a person who has always been a most meticulous, compliant record keeper but through untoward circumstances, such as ill health, has dropped all her plates.

They will want their money, but they won't be vile about it. Lawyer or accountant...? Other posters know better than I do whose assistance it's best to seek.

IRS can seize any funds in her name. Taxes are considered super debts and they take the money however they can. Get a lawyer to try to negotiate a better deal. Owing taxes can impact many things.

Tacy, wouldn't the payroll company pay the taxes? I am confused that they would not bill everything to moms company and take care of everything, deposits, returns, w2s.

Is this standard in your part of the country?

In AZ and NV the payroll company is essentially the employer and pays everything through their accounts and you get a bill for payroll period. If you don't pay they fire your employees.

I am just curious because it seems like an odd practice for what I am used to.

You are so generous with your knowledge, thank you for sharing, it is truly appreciated.

What you really need is a very good accountant to unravel and update the business & personal tax situations. They would be used to dealing with the day to day working of a business & also having processed hundreds+ tax returns. One that is registered to deal with the IRS on an in person basis & can represent the person in dealing with the IRS. Most lawyers are not set up to deal with these type of tax issues and/ or they will hire an accountant anyway & charge more$. You will need the lawyer for other things.

here is a lot of scare stuff here that doesn’t help. In cases where there is no deliberate fault, the tax authorities here and in most places still want the tax that wasn’t paid, but they don’t necessarily use their powers for fines, penalties, or (with luck) interest. It is often possible to amend or lodge past returns, which can help too.

Tacy’s advice is great. Collect up all the information you can, before you start incurring bills from accountants or lawyers. My suggestion mirrors Tacy’s about building a relationship with an individual in the Tax Department. Start while you are flustered, worried, at a loss about what to do etc – you want them to feel sorry for you, which is fully justified. I messed up our farm tax for about four years (in spite of being an accountant, though not a tax specialist). I was distraught. The wonderful lady in the Tax Office sorted out all my old returns and explained it to me. It cost me nothing besides the amount we should have paid in the first place. I hope that you have good luck too!

Get her to a lawyer who specializes in settling tax situations with the IRS! Now!!!!

Listen to tracy022. She seems to know what she is talking about but please don’t try to do this on your own. There are a lot of doom merchants whose posts you should scroll past. This cannot be the first time something like this has happened
Salvation Army seems to be a good place to seek advice and where to go and who to see. They have a lot of resources to help people with financial problems and mess Look online for help in your area but don’t try to be cheap about it. Why not get your representative to make tentative approach to IRS?
I think you may be surprised at how reasonable the government may be

My friend was in a car accident and had a brain injury which caused him to completely forget to file taxes for sometime. The IRS did catch up with him. The agent was actually understanding and kind. I’m not sure if they took this into account and still charged him late penalties/interest but they did help him sort out his taxes and then give him a payment plan that could work for him.
So situations like yours and his happen probably more often than we think.

I once had an employer that was not depositing IRA employee contributions or paying employer portions of social security, taxes, etc... When I found out, I reported them.

There was an audit performed. The IRS was more interested in helping to get this fixed. It took about six months to get through it. I know the employer had a CPA help provide the records that IRS requested. I believe the employer was fined, but no jail time. And this employer did this with full knowledge.

Mom will not go to prison. Just do whatever the IRS requests. Help in every way you can.

Tacy's guidance will be a tremendous help.

Another consideration - and this could be helpful in many regards to many Americns... contact your federal representatives and/or senators. Many do not realize that those elected representatives that have staff to handle all KINDS of requests. From help with getting kids letters of recommendation to attend Westpoint to help with medical bills to - get this - finding out who in the world makes clockworks for outdoor floral clocks (I have inside information).

Your elected representatives/senators have case managers that likely specialize in areas pertinent to their districts, such as veterans affairs. They are - in my opinion - a vastly underutilized resource. Regardless of whether you voted for them, if they govern your region, they should be able to help.

Example - some years ago, during a bout of extended unemployment, I let my passport lapse. I didn't see myself leaving the country anytime soon. Then I got a contract job that, in short order, wanted to send me to Singapore on a 10-day assignment. I nearly panicked because the trip was 3 weeks away. I called one of my state's two senators, explained the situation and because the passport was within two years of expiration, they were able to expedite my request and get me a new one in about 4 days. They don't pay the associated fees - I had to assume that - but they pushed the paperwork through and there is no charge for the help of representatives' or senators' staff.

This grave tax/medical issue could be something they could help with. You have nothing to lose (but time, which may be precious I understand).

Retired IRS Revenue Officer (tax collector) here answering your question. The bottom line answer is yes, they can take her assets to pay her debts. It's more detailed though. The IRS can take her assets like her bank accounts, and other property, even her home and car. It can also levy (garnish or seize) her Social Security income. She will get to keep part of the SS income but they can take it. The taxes that generally go unpaid to the IRS from a business are the taxes withheld from the employees wages (the Social Security and income that the employees get credit for, maybe never even knowing the company they worked for messed up and didn't turn in their money). Also, when a business owner doesn't turn in the withheld taxes, and the business portion of the SS tax, it is typical that they haven't filed or paid their own income taxes. That's on the federal side of things. For state and local taxes each state would have it's own laws on what assets or income can be reached, but they are not going to be able to reach her SS. The types of taxes involved here are more likely to be sales taxes, unemployment or labor & industries disability taxes, or state and local income taxes. With any of the agencies, try filing an appeal to waive some of the penalties and interest due on the unpaid taxes based on her mental incapacity, and provide some documentation. Chances are slim to get some relief, but maybe. There are also programs that allow the agency to legally compromise (reduce)the taxes owed. Laws vary, but the concept is that if the agency is shown that the delinquent taxpayer cannot fully pay the debt (taxes, penalties and interest) by the end of the statute of limitations (which also varies) they may settle for an upfront payment of what they think they can get. This requires a formal application and complete disclosure of income and assets for the agency to consider making a deal to give up the rest of what is legally owed to collect now. Ask the agencies about how to make An Offer in Compromise.

Nobody is going to jail for this...this is a civil matter, with no criminal intent. The demented taxpayer will not be going to jail for anything. Stop scaring people with uninformed speculation.

More than a decade ago, I had to take care of my parents’ tax return after my father’s death. He had been using an accountant in his small town who was not a CPA. In reviewing the return, I thought some of the numbers just didn’t seem right. It involved a property that my father had sold on contract a few years earlier. It turned out that the accountant had made a mistake converting a fraction to a percentage, resulting in the taxable portion of the sale being calculated at only one percent of the correct figure. I went back to the accountant who admitted his mistake and went back and corrected the current return and several previous returns. It resulted in a pretty big bill and the IRS and state both added interest, but there were no penalties assessed. It was a mistake, not fraud, and we corrected it as soon as it was discovered. I agree that you should gather up whatever records you have and follow Tacy’s advice. Show the tax people that you are making an honest effort to clear up this mess.

Yhe follow applies to Federal IRS tax law. I think it will be most helpful.
There is a provision in publication on filing deadlines that states that if you are physically or mentally incapable I'm completing your tax returns during a given., That the time limits and deadlines do not apply! This also means if there is a year she is owed money back, and the IRS says too much time has passed, they are obligated to steal refund that money and apply it to the other tax balance! This is not used very often, and many IRS officials are unaware of it. I had to put the provision and get my congressman involved as an advocate.
The key is you need documentation from her doctor, explaining her condition the fact that she was able to hide it, but it is now obvious it had been pre-existing since approximately give a date based on the evidence of issues with business paperwork and other behavioral issues you may have noticed.
ThisThis provision may sldo spply to penalities...but I don't hsve it in front of me. It does apply to past refunds. It ststes, " no time limits apply"!
Also you have to push for your rights snd negotiate. You probably have to get IRS & state forms signed by her, authorizating access..and to negotiate on her bdhalf. Ask for the IRS to assign you an advocate...they van be very helpful.
Also know that the IRS would rather work out s plan eith you thsn seize non-liquid assets. They can't touch her Social Security or any other Federal Benefits.
They can pit a lien on her home but can't force her to sell it...you just need to pay balance owed at closing, like a mortgage.
They can seize bank accounts, but if Federal Benefits like Social Security went in, then you document that and they have to free up that money. I would set up a new account for all Protected Income!
Unpaid Sales Taxes and Employee Tax Withholdings are issues the state & Fed are sticklers on, but you can negotiate with them! My MIL had to do it when then husband embezzled without her knowing. That was harder, but she kept her house and got her accounts unfrozen.
Again, use your IRS advocate, Agency for Disabled, and Agency on Aging. Once you've done that get staff of your Congressial Rep. involved.
Finally, if she is in a place where she qualifies for or recieves other Federal Benefits, like Medicaid, Food Stamps, assistance with utilities, then they may make you sell/ liquidate the business, but she would be on Can Not Collect (CNC) status after you work with IRS. If she lives for 10 years on that status, Fed. IRS debt is forgiven.

Also if she used an accountant over the years, they are your first contact, as they can be held liable too. If she fired them, or stopped sending information regularly, use that to document start of failure to function.

Follow up any phone conversation with a letter back to IRS etc., stating " Regarding our discussion on (date) with (names) concerning....'. Then state
was discussed & close with, "Please contact me in writing if any of this is incorrect." The notes They make in The System have a way of disappearing or being overwritten. Send it Certified/ Return Reciept.

My father, an attorney taght me that years ago. Good Luck and patience and calm are your friends. Also know you have power and by law the IRS must work with you politely!!!!

PS- You can probably get Free Legal Assistance for the Elderly on this. Getting documents from doctors, based on record of change in her meticulous behavior is key! The fact she was very diligent works on your behalf. The Free Legal Aid can tell you if pension is protected.
Her Social Security definitely is. I just dealt with Legal Aid Attorney on this. They had to research it, but they verified the information.

The answer is yes the IRS can tax your mom for back taxes, but it doesn’t have to happen. If you are referring to Federal taxes? Work with your CPA and ask them if they handle Offer in Compromise with the IRS. That would be my first step, before you make yourself legally liable for her taxes and possibly next step Attorney visit to complete POA.
Hope that helps a little!

The IRS is a super creditor and can levy SS income for back taxes. You don't really need an elder law attorney for tax issues, you need either a tax attorney, CPA or Enrolled Agent with experience in dealing with the collection side of taxes (not just tax form preparation). How much tax are we talking about here?

No offense to others here, but I would not accept the advice from anyone but an elderlaw attorney in your own state.  State laws differ. Elderlaw Attorneys advocate for their clients and their care. They also understand these situations because they see them all the time.  A good one will tell you the limits of their expertise and make referrals (maybe a tax attorney in your case.)

Also, paying for an elder law attorney comes out of your mom's estate, you can get reimbursed for it.   We paid a pretty penny for the advice, but in the long run, it has save my parents from losing their assets due to liens from creditors. 

I had a similar issue (not with a business) but my parents stopped paying creditors. I found that the BEST SOURCE of advice was with an elder law attorney. Her first priority is that my parents keep as much money as possible for their care. She gave me advice (I can pay the debts and have little money for their care or focus on paying for their care first and let the creditors do the work of taking them to court.) Between her and another real estate attorney we were able to figure out a way to protect their assets as much as possible.

But this was COMPLICATED and it involved working with her, seeking out referrals with other attorneys with their own specialty.

Best of luck to you and your mom. I have found it a very difficult and nail biting experience to comb through their finances and discover more and more debts. It sucks. But I'm building a tolerance towards bad financial news and I'm learning a lot so I don't make the same mistakes as they did. I have done some incredibly heroic work for them to save them from some of the consequences of my dad's dementia. Sigh...but no applause from my family, I'm an invisible hero. :-) But I do pay myself on the back every so often, I feel proud at figuring out some loop holes with the help of a couple of different attorneys. I'm proud that that I rescued them from getting thrown out on the street due to unpaid property taxes. I couldnt have accomplished any of this with the elder law attorney.

best wishes!

Get an elder law attorney involved now.

As POA, You need to Consult a Lawyer's Advice to Handle the Situation very Nice. Someone has to be in Charge of her affairs and if your Name is NOT on her Accounts, Tey may Put a Freeze on them to gettheir Money, honey...Put all of her Affairs NOW in order.

OurOldHouse, I hope that you are checking out the real situation. I would not waste money on an elder law attorney, they don't typically understand employee taxes, not part of there job description.

Tacy22 has provided the most accurate information. You need to verify what is actually happening. The payroll company should have paid those taxes that were withheld from employees checks and the companies matching dollar amounts. This could be a data input error. Ask the employee that says she has no income for 3 years to look at her w2 or paystub and verify the information is correct, I would question her about any changes in her life, divorce, name change, etc. I would also contact the payroll company and request a copy of the payments made on behalf of your moms company.

I would verify that there is even any taxes owed before I spent any money on attorneys. Mom will have to pay any withholding taxes or unemployment taxes that were generated by payroll. They won't say no problemo. Her worker's compensation insurance would be determined by a year end audit. They would not provide 3 years of coverage without an audit. To many people try to hustle the system and they have figured it out. I would let the insurance company come to her, however, it is not necessary to pay additional money to them, she more than likely had a deposit that was based on annual premiums. They can't come after her unless they have done the audit, they don't have any numbers to go by.

Please verify if there is even any issue, besides one employee with a problem on a SS benefits notice. This could so not be a huge issue. Even if it is a problem at least you are operating from a position of knowledge and not fear and confusion.

If you need an attorney, big if, please find a good business tax attorney. They are on first name basis with tax reps and they can get things done that you can't. I would not sign anything, if asked hire an attorney. This really should be about paying taxes and nothing else.

Unfortunatly your mom is personally responsible as the S Corp holder. Were there other stock holders?

Why not contact the IRS and explain the issue?  With doctor documented evidence, something should be able to be worked out.  I'd consult a tax attorney as well.

Verify that it's a legitimate debt that has correct figures. If it's only unemployment taxes, there's a quarterly wage report that was filed....
Figure out exactly what was and wasn't filed/completed and paid. Contact that payroll company What exactly did the unemployment letter state?

If it's just unemployment, then something isn't adding up. After reading through the comments---it sounds as if the payroll company would have paid everything accordingly. So...what's really happening--you received a standard unemployment taxes due notice? What was the payroll company's response??

I just viewed a few docs about this exact same issue in Kentucky, yet in reality all taxes were paid. Yet something clerical happened at the state level. A lien was placed and removed, due to the error being found. It's a jolting experience for sure. But verify the accuracy of the notice against numbers that ADP(the payroll company) will have somewhere.

ADP sent your mother the 941 form since she was not set up with ADP's Tax Filing Service or was set up as deposit only. The quarterly report that normally Displays SUI taxable wages and total unemployment taxes due in the quarter wasn't generated, likely.....It's fixable, not too complicated. Go online and research what is needed. It seems as if your mom didn't utilize ADP to its fullest capacity.



So don't panic--use your brillance, and be patient. As you know it's boringly boring stuff. The mistake likely will be found by the payroll company. Dig deeper you might find that your mother did everything correctly. Yet somewhere somehow a decimal was recorded incorrectly.