Over the past few weeks, I’ve written about payroll tax liabilities for a business and how the IRS assesses these taxes and attempts to collect them from both the business and employees within the business that the IRS deems “responsible” for “collecting, accounting for and paying the taxes” to the government.

This week I am going to discuss strategies for resolving these payroll tax liabilities.

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 business owners resolve their payroll tax problems.

The first strategy for any employee is to avoid being held personally liable for any unpaid payroll tax by the IRS. You do this by proving that while you may have had a fancy title, like “Executive Vice President”, you had no actual authority or responsibility over the preparation and filing of the payroll tax returns, processing of the weekly payroll or signing the employee’s payroll checks. You aren’t an owner and your position isn’t spoken to in the company by-laws and you have no “hire of fire” authority.

Once that’s cleared up the business has the same resolution options that are available to individuals who wish to address their tax liabilities:

  • Installment Payment Agreements (streamlined, regular or partial-pay)
  • Currently Not Collectible
  • Offer in Compromise (lump sum or deferred)

Another option is to threaten to shut the company down, make a “designated” payment to cover the “trust fund recovery penalty” and declare bankruptcy. While payroll tax liabilities are not dischargeable in bankruptcy, you may be able to work out a more reasonable payment plan with the IRS while in a Chapter 11 bankruptcy.

For a more detailed explanation of these resolution options, please contact me.

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.