Back Payroll Taxes
Get Help with Delinquent Payroll Taxes
It is strongly advised that you seek professional representation if you are behind on Payroll Tax, as the IRS is much more aggressive in pursuing delinquent Payroll Tax than any other form of tax.
This is because payroll taxes are a special kind of tax – what’s referred to as a Trust Fund Tax -- where an employer collects tax on behalf of the government by withholding from employees pay but then fails to deposit these funds to the US Treasury. In the eyes of the IRS, this employer has essentially stolen from the government by keeping this money that never actually belonged to the business. Take necessary steps and avoid a lot of unnecessary headaches!
What is the Trust Fund Recovery Penalty?
The IRS will enforce what’s called a Trust Fund Recovery Penalty against any officers of the business or any individual(s) within the business who has check-signing capabilities so they can pursue collection efforts against the business AND any person they feel was willful or responsible for the failure to make the Payroll Tax Deposits. You really need to make sure you know what you are doing and how to deal with this type of situation if you are dealing with some significant payroll tax issues.
If you simply are behind on payroll taxes and have yet to be contacted by the IRS regarding the Trust Fund Recovery Penalty, you can avoid having to go through this nightmarish process and we will make sure we minimize the overall burden to any individuals who can be held responsible. Call us and let us know what’s going on so we can help.
How Can I Resolve Back Payroll Taxes?
If behind on Payroll Taxes, it is important that you fully understand what you are “required” to disclose versus what the IRS “wants” you to disclose if you want to protect yourself from aggressive collection efforts. Often times, they will request information you are not required to disclose as a tactic to escalate collection efforts. You are not able to reverse information that has already been shared so please be careful! We can assist you in understanding all of this. Just let us know what is going on so we can help.
Like any resolution with the IRS, resolving back payroll taxes means that your company needs to get a formal resolution in place such as a payment plan, an offer in compromise, or have your accounts placed into currently not collectible status.
By establishing a formal resolution, you ensure that the IRS will not take aggressive action against your company to collect the taxes such as bank account levies, accounts receivable levies, and seizures of property.
What Do I Need To Do To Put a Formal Resolution Into Place?
On the surface, handling a back payroll issue is similar to any other delinquent tax issue. Before you can propose any kind of resolution with the IRS you must do the following:
- Start Paying Your Current Tax Deposits on Time: you cannot enter into any arrangements with the IRS for back payroll taxes until you are making your current tax deposits on time. This is because the IRS wants to ensure that paying your taxes will not be a problem in the future.
This requirement is more difficult for businesses with Back payroll taxes because they are required to make a tax payment at least once per month, and sometimes several times a month. This gives companies multiple chances of failure to meet this requirement, compared to an individual who may just need to meet this requirement just once every year.
- File All Missing Tax Returns: If you have any tax returns that have not been filed and that are past due, you must file these returns before the IRS can consider any arrangement to resolve your debt. The IRS forces you to do this to get you back into compliance and to ensure that any agreement they make with you covers all of your tax debt, not just a
- Complete a Financial Statement: the IRS will require your business to complete a full financial statement disclosing all of the assets, liabilities, income, and expenses of the company. They use this financial statement to determine what kind of monthly payment they will require from you. Can’t reiterate enough how important it is that you truly understand what is required to be disclosed. Don’t just volunteer information that can jump up and bite you!
More Information on Trust Fund Recovery Penalty!
As mentioned above, the most important consideration to take into account is the Trust Fund Recovery Penalty. If your business owes back payroll taxes and is incorporated or an LLC, the IRS can defeat your protection from personal liability and assess you personally with a portion of the back payroll taxes.
This portion is known as the "trust fund" portion of the debt, and it includes the amounts that were actually withheld from employee paychecks. It does not include any of the corporate matching taxes, or any of the penalty and interest that have been assessed to your company.
The IRS can pursue this personal assessment against any owner or employee of the company that made financial decisions for the company. If your company owes back payroll taxes, the IRS will almost always pursue a Trust Fund Recovery Penalty assessment against the owners too.
This means that if you are looking for help on your company's back payroll taxes, you should also expect that you are going to need help defending against this assessment and, if the assessment is made, working out a plan with the IRS for the owners of the company personally.
In other words, you may have to set up two or more separate payment arrangements -- one for the company and one for each owner of the company. If you are looking for professional help any firm that you consider hiring should know this and include it in their quote for services -- but many do not, and come back and ask for more money to handle it.
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