by Fresh Start Tax | Jan 16, 2013 | Owe Payroll Taxes
Owe Back Tax – Railroad Retirement, Excise, Payroll Taxes – Former IRS Agents
If you will owe back payroll taxes, 941 taxes, or trust fund taxes, railroad retirement or excise tax call Fresh Start Tax LLC today and we can offer you a free consultation on how to completely resolve this matter. We are tax experts in this area.
On staff are tax attorneys, CPAs, and former IRS agents and appeals officers. We have over 205 years of professional tax experience in over 60 years of working directly for the IRS in the local, district, and regional offices of the Internal Revenue Service.
Whether you are in business or just worried call us today to hear the best advice on how to bring your case to a peaceful resolution.
Payroll taxes,Excise and Railroad Retirement Taxes are an IRS priority
IRS especially considers payroll taxes part of the trust fund tax family. IRS considers these payroll taxes a priority since the taxes are really not a direct tax but monies that are held in trust by a company or corporation that has not been turned over IRS. So the highest priority is given collecting trust fund money.
Good Advice
If you are currently in business the best advice we can give you being former IRS agents is to make sure you are at least current for the week, month or current quarter. When IRS sees that your current they are more than likely to offer you a payment plan.
Payroll Taxes in Trust Fund Cases
It also should be known that these payroll taxes spawn off trust fund taxes . The Trust Fund tax is a result of nonpayment of 941 payroll taxes.
As a result IRS will impose under section 6672 of the IRC code an assessment against those responsible for paying the payroll taxes. This trust fund tax comprises of all the withholding in one half of the employee Social Security.
The responsible persons are not responsible for the employers part of the Social Security, the penalties, the interest or the unemployment taxes.
The position of the IRS
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.
The Trust Fund Recovery Penalty
These 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.
Responsible for the Trust Fund Cases
The Trust Fund may be assessed against any person who:
a. is responsible for collecting or paying withheld income and employment taxes, or for
b. paying collected excise taxes, and
c. willfully fails to collect or pay them.
A Responsible Person
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:
1. an officer or an employee of a corporation,
2. a member or employee of a partnership,
3. a corporate director or shareholder,
4. a member of a board of trustees of a nonprofit organization,
5. another person with authority and control over funds to direct their disbursement, or
6. another corporation or third party payer.
Willfulness for Trust Fund
For willfulness to exist, the responsible person:
a. must have been, or should have been, aware of the outstanding taxes and
b. either intentionally disregarded the law or was plainly indifferent to its requirements.
Using available funds to pay other creditors when the business is unable to pay the employment taxes is an indication of willfulness.
How IRS conducts there investigation
You may be asked to complete an interview ( form 4180 can be found on our website )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.
Figuring the Trust Fund Amount
The amount of the penalty is equal to the unpaid balance of the trust fund tax. The penalty is computed based on:
a. The unpaid income taxes withheld, plus
b. The employee’s portion of the withheld FICA taxes.
For collected taxes, the penalty is based on the unpaid amount of collected excise taxes.
Assessing the Trust Fund
If the IRS determines that you are a responsible person, IRS will provide you a letter stating that we plan to assess the TFRP against you. ( Trust fund recovery penalty )
You will 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.
Caution
Once the IRS asserts the trust fund penalty, IRS can take collection action against your personal assets. If these taxes are not paid IRS has the right to send out bank and wage levy garnishments as well as filing the federal tax lien.
Remember if you owe back taxes including the railroad retirement, excise or payroll taxes is in your best interest to contact IRS before they start any action against you.
Owe Back Tax – Railroad Retirement, Excise, Payroll Taxes – Former IRS Agents
by Fresh Start Tax | Jan 13, 2013 | IRS Tax Debt
Owe Railroad Retirement Taxes, Excise Tax – Settle with Former IRS Agents
If you owe railroad retirement taxes or excise taxes feel free to call us today to discuss your different tax options to deal with the Internal Revenue Service.
You can speak directly to tax attorneys, CPAs, or former IRS agents. We can offer different tax solutions to you to help settle or negotiate the back taxes you owe as a result of these RRT, Excise Taxes
We have over 205 years of professional tax experience and over 60 years of working directly for the Internal Revenue Service and the local, district and regional office of the IRS.
We also taught tax law at IRS.
IRS has the ability to personally impose these taxes against individuals who were responsible for, and it did not turn this money over to the Internal Revenue Service.
Caution should be used in dealing with Internal Revenue Service because they can reach into the individual’s pocket and seize the money back on behalf of the US government.
Because railroad employers do not come under the social security system, they file different employment tax returns from those used to report FICA wages.
The forms used to report railroad employment taxes are presented below.
Form CT-1
Employer’s Annual Railroad Retirement Tax Return
A railroad employer files an annual CT-1 to report RRTA taxes.
All CT-1 returns are filed with the IRS Cincinnati Campus, and must be filed by the last day of the second month following the end of the calendar year (normally, by February 28th).
The IRS Cincinnati Campus provides information to the RRB to allow the RRB to reconcile railroad employer accounts.
Form CT-2
Employee Representative’s Quarterly Railroad Tax Return
A CT-2 is filed on a quarterly basis by individuals subject to the Tax on Employee Representatives.
Form 941 – Tax Form
Employer’s Quarterly Federal Tax Return
Although railroad employers are not subject to FICA, they are still required to withhold income tax on behalf of their railroad employees; there is no provision on Form CT-l to report the income tax withholding, so railroad employers use Form 941 for this purpose.
It is also conceivable that an employer could have some employees covered by FICA, and other employees covered by RRTA. In this situation the employer would be reporting FICA wages on the Form 941.
Tax Form W-2
Wage and Tax Statement
Railroad employers use Form W-2 to report wage payments to employees and to SSA. RRTA taxes are shown in Box 14, and Boxes 3, 4, 5, 6 and 7, relating to FICA and Medicare, should be blank.
Tax Form W-3
Transmittal of Income and Tax Statements
Railroad employers use Form W-3 to transmit Forms W-2 to SSA. Form W-3 provides a box to indicate that the employer is a railroad, alerting SSA to the fact that the information reported reflects RRTA rather than FICA and Medicare.
If an employer has some employees covered under FICA and Medicare as well as RRTA, the Form W-2’s must be segregated by type, and separate Forms W-3 prepared for each batch.
RRT/ Payroll taxes are an IRS priority
IRS considers RRT & payroll taxes part of the trust fund tax family. IRS considers these payroll taxes a priority since the taxes are really not a direct tax but monies that are held in trust by a company or corporation that has not been turned over IRS. So the highest priority is given collecting trust fund money.
Good Advice
If you are currently in business the best advice we can give you being former IRS agents is to make sure you are at least current for the week, month or current quarter. When IRS sees that your current they are more than likely to offer you a payment plan.
RRT / Payroll Taxes in Trust Fund Cases
It also should be known that these payroll taxes spawn off trust fund taxes . The Trust Fund tax is a result of nonpayment of 941 payroll taxes.
As a result IRS will impose under section 6672 of the IRC code an assessment against those responsible for paying the payroll taxes. This trust fund tax comprises of all the withholding in one half of the employee Social Security.
The responsible persons are not responsible for the employers part of the Social Security, the penalties, the interest or the unemployment taxes.
The position of the IRS
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.
These 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.
Responsible for the Trust Fund Cases or Railroad Retirement Taxes
The RRT & Trust Fund may be assessed against any person who:
a. is responsible for collecting or paying withheld income and employment taxes, or for
b. paying collected excise taxes, and
c. willfully fails to collect or pay them.
A Responsible Person
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:
1. an officer or an employee of a corporation,
2. a member or employee of a partnership,
3. a corporate director or shareholder,
4. a member of a board of trustees of a nonprofit organization,
5. another person with authority and control over funds to direct their disbursement, or
6. another corporation or third party payer.
Willfulness for Trust Fund or Excise Taxes
For willfulness to exist, the responsible person:
a. must have been, or should have been, aware of the outstanding taxes and
b. either intentionally disregarded the law or was plainly indifferent to its requirements.
Using available funds to pay other creditors when the business is unable to pay the employment taxes is an indication of willfulness.
How IRS conducts there investigation
You may be asked to complete an interview ( form 4180 can be found on our website )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.
Figuring the Trust Fund Amount
The amount of the penalty is equal to the unpaid balance of the trust fund tax. The penalty is computed based on:
a. The unpaid income taxes withheld, plus
b. The employee’s portion of the withheld FICA taxes.
For collected taxes, the penalty is based on the unpaid amount of collected excise taxes.
Assessing the Trust Fund
If the IRS determines that you are a responsible person, IRS will provide you a letter stating that we plan to assess the TFRP against you.
You will 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.
Owe Railroad Retirement Taxes, Excise Tax – Settle IRS Tax Debt
by steve | Jun 2, 2010 | IRS Tax Advice
Delinquent payroll taxes could be one of the most serious financial hurdles facing a business and the corporate officers or responsible persons. Congress enacted the” Trust Fund Recovery Penalty Statute” to encourage prompt payment of withheld and other collected payroll taxes by allowing the IRS to assert a liability against responsible third parties under code Section 6672. As a former Revenue Officer I set up thousands of these cases and know what it takes to get our clients off the hook. The amount of the trust fund penalty imposed by the federal statute for failure to comply with its provisions is measured by the payroll taxes required to be collected or collected and not paid over. That is why the liability is referred or called the “100% Penalty”. It is 100% of the taxes that you held in trust. The IRS penalty is civil in nature, not criminal in nature.The trust fund tax formula is usually all the withholding and one-half of the social security tax. This is a general rule.
Congress clearly restricted the provisions of IRC 6672 to the so called”Trust Fund” taxes as defined in IRC . In other words, the penalty only applies to collected or withheld payroll taxes that are imposed on persons other than the party who collects payroll taxes, accounts for payroll taxes, and pays over such payroll taxes. Excise taxes are the trust fund as well.
There are two major tests to determine if someone is subject to the provisions of IRC 6672 of the Code.
:
Whether the party against whom the penalty is proposed had the duty to account for payroll taxes, collect payroll taxes, and turn over trust fund payroll taxes; and (2) Whether he or she willful failed to perform this duty relating to the trust fund payroll taxes.
In general, the IRS has the right to pursue any person who, meets the tests, even if he was not an officer or employee of the corporation which originally collected the payroll taxes. Most times however, it is usually the corporate officers.Form 4180 is used to determine responsibility and the revenue officer assigned the case fills out the form with responsible persons.
The penalty can be assessed against more than one person. It is not unusual for the IRS to assess the penalty for payroll taxes against several responsible persons. In the event that the IRS assesses several persons for trust fund payroll taxes, it may collect the entire liability from any of those persons. most of the time the bank signature cards are used to determine who is responsible and is almost an acid test for the IRS. Those who sign bank signature cards have a hard time being removed from the penalty.
When a corporation and its officers fails to pay payroll taxes, the IRS may proceed against the persons responsible for the nonpayment of such payroll taxes. IRC 6672 provides statutory authority for imposing a Trust Fund Recovery Penalty on “any person required to collect payroll taxes, truthfully account for payroll taxes, and pay over collected payroll taxes ” who willfully fails to collect such payroll taxes or willfully attempts in any manner to evade or defeat such payroll taxes or payment thereof. Generally, two conditions must be met in order to assess and collect the Trust Fund Recovery Penalty tax: (1) The taxpayer must be a responsible person for such payroll taxes, an (2) The taxpayer’s conduct must be willful in relation to the mishandling of such payroll taxes
The key to liability for payroll taxes under Section 6672 is control of checks,the monies, who paid the bills, who authorized the bills to be paid, the power to control the decision-making process by which the employer corporation allocates funds to other creditors in preference to its withholding payroll taxes obligations. Liability attaches to those with power and responsibility within the corporate structure for seeing that the taxes withheld from various sources are remitted to the IRS. This duty is generally found in corporate officials or employees charged with general control over corporate business affairs who participate in decisions concerning payment of creditors and disbursal of funds.
The IRS must prove and establish a second element for liability under the Trust Fund Recover Penalty for payroll taxes. That element is “willfulness.” A responsible person need not have failed to pay the payroll taxes with a fraudulent or evil purpose. That person must merely be shown to have knowingly and intentionally disregarded the duty to pay trust fund payroll taxes to the IRS. “Willfulness” can be defined as “‘an act is willful if it is voluntary, conscious, and intentional. A responsible person acted willfully if he ‘knowingly’ used available funds to prefer other creditors to the IRS.
There are many factors used by the IRS to determine who is / are the responsible persons. After a review of corporate documents, bank signature cards, interviews, completion of the form 4180 and reviewing the canceled checks it is very easy for an experienced Revenue Officer to make such a determination.
Control is ultimately found in who controlled the money.We can tell you today if you will be found responsible by telling us your set of facts. Appeals hearing are available with Trust Fund cases.
Fresh Start Tax can help you in the very sensitive situation. Call us today so we can evaluate your case.
