March 8, 2015

payrollAll businesses that pay wages to its employees are required by law to deduct Medicare, social security, and federal income tax from the paychecks of its employees. The deductions from these paychecks, commonly referred to as trust fund taxes, are to be paid to the IRS on a semiweekly or monthly basis. Apart from the trust fund taxes, all businesses must also give a matching contribution for social security and Medicare taxes on behalf of their employees. These trust fund taxes and matching contributions to social security and Medicare taxes are known as payroll taxes.

Is your small business behind on payments and having difficulty paying payroll taxes in full? Unfortunately, collecting unpaid payroll tax liabilities is among the highest priorities of the IRS. This is because it is payroll tax deposits that actually fund the federal government’s day-to-day operations. Therefore, the IRS is generally quick and aggressive to collect payroll taxes if they are not paid in a timely manner, and the penalties may be severe for late payment of these amounts. There is good news: it is very possible for a small business to resolve this tax liability and pay back these taxes over time.

There are numerous ways to settle your delinquent payroll taxes with the IRS. If you owe the IRS $25,000 or less for instance, then you may be qualified for what’s known as an In-Business Trust Fund Express Installment Agreement or IRS IBTF Express IA. With this arrangement you can be given up to 24 months to catch up on your payroll taxes. If you owe over $25,000 in payroll taxes at the time the agreement is established, then you may first pay down the liability before entering into the agreement.

The IRS and its agents are watchful for repeat offenders. If your company is found to have unpaid payroll taxes quarter after quarter, the IRS may decide to close the company down and sell its assets in order to obtain the due payment, or acquire a copy of your company’s accounts receivable list and send out levies to all parties that owe money to the business. In some cases, the IRS may also opt to locally file a Federal Tax Lien against the business that owes payroll taxes to the agency.

Numerous business owners who have formed a LLC or corporation are under the impression that they are protected from their non-payment of payroll taxes due to the fact that they have limited liability. This is not true, however, when it comes to trust fund taxes. The IRS is given the ability to transfer this liability to responsible individuals of a particular business due to federal law, and so these individual business owners then become subject to collection activities.

If you are a business owner or a corporate officer and are behind on your payroll taxes, it is essential that you call an experienced business tax attorney immediately in order to devise a plan that can effectively minimize your personal liability.

It is important to note that as an employer, you are not exempt of the responsibility to see to it that tax returns are filed in a proper and timely manner. That’s true even if you make use of a payroll service or hire a third party to do your payroll work.

Categories: Business Tax Issues