Being a former IRS agent and teaching instructor you should understand that the Internal Revenue Service is tougher on payroll taxes than any other tax.
The reason for this is very simple, this tax is money held in trust in not an actual tax.
It is one of few taxes that the Internal Revenue Service not only go after the company it can in addition can go after the responsible persons or individuals. After the IRS creates individual tax assessment for those responsible it often time results in the filing of federal tax liens, bank and wage levy garnishments.
This is a tax that you should not fool around with because it is number one on the IRS to hit list.
The Internal Revenue Service will individually engage those responsible under section 6672 of the Internal Revenue Code
Let Former IRS agents and managers get you immediate tax relief via a payroll tax settlement.
We should be able to make sure we can reach a reasonable settlement on your payroll tax liability and you can continue to operate your business without fear and worry from the Internal Revenue Service.
With over 60 years of direct working experience at the Internal Revenue Service we know every possible tax solution that can get you immediate and permanent tax relief for a payroll tax settlement.
IRS does not want to seize your business for back taxes due on payroll taxes, however 941 payroll taxes are a big concern for the IRS.
The Internal Revenue Service will want to fully review your company or corporation before you can obtain in IRS payroll tax settlement. You will need to provide IRS with the current financial statement along with proof that all payroll tax deposits and 941 tax forms have been filed. Many times IRS will want a personal or individual financial statement for more responsible persons.
For most company’s of the IRS payroll tax settlement may come in three forms. Review your current financial statement Internal Revenue Service may determine that you are a hardship candidate, monthly payment agreement candidate or an offer in compromise candidate and IRS payroll settlement.
To encourage prompt payment of withheld income and employment taxes, including social security taxes, railroad retirement taxes, or collected excise taxes, Congress passed a law that provides for the TFRP.( trust fund recovery penalty )
These payroll taxes are called trust fund taxes because you actually hold the employee’s money in trust until you make a federal tax deposit in that amount.
The TFRP may apply to you if these unpaid trust fund taxes cannot be immediately collected from the business.
The business does not have to have stopped operating in order for the TFRP to be assessed
The TFRP may be assessed against any person who:
A responsible person is a person or group of people who has the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes.
This person may be:
Must have been, or should have been, aware of the outstanding taxes and either intentionally disregarded the law or was plainly indifferent to its requirements (no evil intent or bad motive is required).
Using available funds to pay other creditors when the business is unable to pay the employment taxes is an indication of willfulness.
You will be asked to complete an interview in order to determine the full scope of your duties and responsibilities.
Responsibility is based on whether an individual exercised independent judgment with respect to the financial affairs of the business.
An employee is not a responsible person if the employee’s function was solely to pay the bills as directed by a superior, rather than to determine which creditors would or would not be paid.
The amount of the penalty is equal to the unpaid balance of the trust fund tax. The penalty is computed based on:
For collected taxes, the penalty is based on the unpaid amount of collected excise taxes.
Assessing the TFRP
If the IRS determines that you are a responsible person, we will provide you a letter stating that we plan to assess the TFRP against you.
You have 60 days (75 days if this letter is addressed to you outside the United States) from the date of this letter to appeal our proposal. The letter will explain your appeal rights. Refer to Publication 5, Your Appeal Rights and How to Prepare a Protest if You Don’t Agree (PDF), for a clear outline of the appeals process.
If you do not respond to our letter, we will assess the penalty against you and send you a Notice and Demand for Payment.
Once we assert the penalty, the IRS can take collection action against your personal assets. For instance, we can file a federal tax lien or take levy or seizure action.
Businesses that are currently operating and owe payroll taxes will find that the IRS will be very aggressive with the collection process of these type of taxes. The IRS looks at this type of payment as monies that were held in trust by your company and meant to be paid to the IRS for the benefit of the employees. These actually are not taxes, the government has trusted the company to collect and remit these monies to the IRS.
The IRS and its agents keep a watchful eye out for repeat offenders and companies that run up deficits quarter after quarter. These companies are prime targets for the IRS. If the payroll taxes are not paid the IRS could close the company and sell off the assets of the company to obtain the payment due. The IRS could also get a copy of the company’s accounts receivable list and send levies out to all people that owe the company money. IRS also has a special call alert system and FTD (federal tax deposits) system alert to let them know who, in their area, is behind on payroll taxes. 941 Payroll Taxes or Trust Fund Cases are one of the IRS’s top priority.
The IRS can file a Federal Tax Lien locally against the company that owes the payroll taxes. In addition, IRS may file a Federal Tax Lien under the UCC (Uniform Commercial Code), in the state capitol where the business is located. This will effect the credit, the ability to borrow, and how vendors check on and deal with your company.
With the economic downturn, many companies are going to find themselves dipping into the employee payroll taxes. Doing this can cause a huge problem and it is only a matter of time before the IRS comes knocking at the door. If you find yourself in this situation, our professional tax team will be able to help your company avoid forced collection from the IRS and negotiate a livable payment agreement. These are situations that you should only use a professional tax resolution company because of the high priority the government places on delinquent payroll taxes.
One of the issues a delinquent payroll tax liability in a corporation creates is the personal responsibility. This never goes away until the payroll tax, Trust Fund Liability is paid in full. The IRS will conduct an investigation and find out who is responsible for the Trust Fund Liability. They want to find out who was the decision maker and who authorized and was responsible for paying the bills. After the investigation the IRS sends out a letter to those individuals they found responsible. These individuals will get a chance to appeal those findings. Once the determinations are made the assessments become final and IRS will personally go after the assets of the individuals who are responsible for paying these taxes. If you are a responsible officer or party of a corporation that owes back payroll taxes, the IRS will look not only to the company, but also to you personally for the amount due. This is known as the Trust Fund Penalty. This will not go away until the amount due is paid. In addition, the amount owed is not discharged in bankruptcy. The IRS will pursue you until they are paid in full from whatever source available.
Questions on Payroll Tax Liability – Feel free to email us a question!
If IRS filed a substitute tax return for you, we can help!