Past Payroll Taxes A Current Business Expense?

[timtax]

I have a client who had an incorporated business that no longer exists as of a handful of years ago.  My client is now on a payment plan with the IRS to pay back those payroll taxes for that incorporated business (he's paying back $600/month).

My client currently runs a Schedule C business and is asking if the back taxes he is paying can be deducted as a business expense for the Sch C business.

My initial reaction is that they are unrelated and those payments would not be considered a deductible business expense for his current Schedule C business.

I would appreciate any insight!  Thank you! 

[qbteachmt]

Of course one entity doesn't get to deduct something that does not relate to its own operations, if there is no liability.

"Incorporated" is a bit vague: which entity type? Where did that liability transfer when the entity was shut down and what is the nature of that tax payment?

It isn't clear these are deductible at all. Paying "back taxes" as payroll can have been theft from employees, because the employee share is deducted from gross wages. You don't get to deducted wages and also the tax payment; the tax payment is banking, not expense but cash flow. And you don't get to deduct something that is an illegal activity. If the tax returns and the reporting and payroll filings for that entity included the employment taxes already, you don't get to deduct them for paying them later, as that is the banking.

[dkh]

Have you determined whether that incorporated business was on a cash or accrual basis?  Is it possible those payroll taxes have already been deducted ?  

Regardless of the above answer, I would not include on the current Schedule C.    

Schedule 1  Adjustments to Income ????