Payroll Tax Assessment & Collection for Businesses

Payroll Tax Assessment & Collection for Businesses

As I mentioned in last week’s blog, here, “Struggling or failing businesses often use these funds (payroll tax withheld from employees) to pay their employees and vendors in order to stay open instead of sending the money to the government. Unscrupulous business owners embezzle the money to subsidize a lavish lifestyle”.

This occurs because it is tempting for a business owner with a cash flow problem to use these funds instead of going to the bank and asking for a loan.

My firm, By The Book Taxes, located in Norwalk, CT specializes in income tax preparation for individuals, families and self-employed people. By the Book Taxes also helps clients resolve their tax debts by preparing and filing Installment Payment Agreements, Offers-in-Compromise, Currently Not Collectible and Innocent or Injured Spouse applications.

I also help businesses that have delinquent payroll tax problems.

The assessment and collection process for payroll tax liabilities is very similar to the process the IRS uses to collect delinquent federal income tax from individual taxpayers. The difference is that in addition to going after the business for payment of taxes, the IRS may also go after the business owners personally along with any other people, like management or the outside accounting firm that the IRS considers to be “responsible” for the non-payment of tax.

Here’s the IRS collection process for delinquent payroll taxes:

  • The IRS realizes the quarterly payroll tax returns (Form 941) aren’t filed or withholding isn’t forwarded to US Treasury
  • IRS requests filing of returns and payment of taxes withheld
  • If payment is not received a “silent lien” is issued against all business property and the collection letters become more aggressive
  • If more than $10,000 is owed the IRS will file a “Notice of Federal Tax Lien”
  • If there is still no response, then the IRS begins “levying” the business. A levy is an actual “taking”, like emptying out the company bank account or attaching all receivables from clients and vendors.

In next week’s blog I will go into more detail about Internal Revenue Code Sections 6672 and 3505 which allows the IRS to collect delinquent payroll taxes from “responsible persons” in and associated with the business who exhibit a willful and intentional disregard for the tax laws.

If your business is falling behind on paying your payroll taxes and filing payroll tax returns, please call me before the IRS finds you. I can help.
Don’t be their next press release.

Introduction to Payroll Tax Liabilities

Introduction to Payroll Tax Liabilities

When I do presentations at local business networking meetings, I am frequently asked these questions by people with significant tax liabilities:

  • What are my chances of being audited?
  • Am I going to lose my house?
  • Could I go to jail?

My firm, By The Book Taxes, located in Norwalk, CT specializes in income tax preparation for individuals, families and self-employed people. By the Book Taxes also helps clients resolve their tax debts by preparing and filing Installment Payment Agreements, Offers-in-Compromise, Currently Not Collectible and Innocent or Injured Spouse applications.

Over the next several weeks I will be writing a series of blogs on the resolution of payroll tax liabilities for businesses and their owners.

I have been told by experienced IRS collections officers that 75% of their large collection cases involve businesses that don’t forward payroll tax withholdings taken from employee’s wages to the federal government.

The Social Security and Medicare (FICA) taxes along with the federal income tax withheld from employees are considered “trust taxes” because the government “trusts” that a business will withhold them and then forward them to the US Treasury on a timely basis.

About 70% of the US government’s tax receipts are collected through payroll withholding.
Struggling or failing businesses often use these funds to pay their employees and vendors in order to stay open instead of sending the money to the government. Unscrupulous business owners embezzle the money to subsidize a lavish lifestyle.

Here is a link to a press release issued by the Tax Division of the US Justice Department regarding one of these cases:
https://www.justice.gov/opa/pr/west-virginian-business-owners-sentenced-prison-failing-pay-employment-and-individual-income

If your business is falling behind on paying your payroll taxes and filing payroll tax returns, please call me before the IRS finds you. I can help.
Don’t be their next press release.