Are you an employer whose business is currently unable to pay payroll taxes, including your business’s matching portions? Whatever the type of business entity – sole proprietorship, partnership, limited liability company, corporation, or nonprofit – all entities and their representatives face the same withholding and filing obligations to the IRS.
Payroll tax issues constitute some of the most challenging tax circumstances a business can face. Often small to midsized businesses run short of cash flow. Employers then unwisely opt not to make required tax deposits and may not file the necessary IRS Form 941, Quarterly Federal Tax Return, which shows the total amount of wages paid to employees every three months. Sometimes companies hire bookkeepers and accountants who are inadequately informed about IRS reporting requirements and so do not fulfill the duties of their positions. At other times, there may be questions concerning employee status for those representing your company. Or your business records may contain payroll errors that internal reviews did not bring to light.
No matter the reason, if your business has dropped out of compliance concerning payroll taxes, you should consult Law Offices of Christy Lee, P.C., promptly, as the IRS is deadly serious when it comes to dealing with this issue. Of all possible types of tax offenses, Uncle Sam treats payroll tax deficiencies as the most egregious.
When you withhold taxes from an employee’s paycheck, you become a trustee of the money until you turn it over to Uncle Sam – thus the term “trust fund tax.” If you don’t transfer the funds by their due dates, Uncle Sam treats you with no more respect than a thief. Payroll penalties and interest are the harshest of all the charges meted out by the IRS. They quickly accrue on the outstanding balances, and before you realize it, your business has incurred substantial tax penalties, which are not allowable as business deductions.
This all means that before you buy kibble to nibble – for the humans of your household as well as for your puppy – you must pay your electronic payroll tax deposit. Each time. Every time. By the deadline. If you can’t pay the amount due, at the very least, file the relevant IRS forms.
What happens if your business falls out of compliance with the Internal Revenue Code concerning payroll taxes?
Uncle Sam has a system to verify that your business books are up-to-date and accurate. This holds doubly true for records involving payroll. At the end of each year, you must file copies of your business’s Form W-2 Wage and Tax Statements with the Social Security Administration, which in turn provides those figures to the IRS for comparison with all your Form 941s and your payroll tax deposits for the entire year. You must also file Form 940, Employer’s Annual Federal Unemployment Tax Return. If the numbers for the annual total payroll aren’t in synch among all the various reports, including any returns which your state may insist on, the IRS will launch an audit. Since your auditor usually examines your bank records in their totality, often the audit will extend beyond payroll taxes to include other business expenses. And once it opens your payroll books for one year, the IRS almost always opens books for several other years as well.
The IRS views repeated nonfilings or discrepancies in payroll records as deliberate and willful noncompliance with the Internal Revenue Code. To halt this bad behavior, the IRS will take severe measures against your business. What is worse, you and any other business associates responsible for disbursing company funds can be held personally liable for unpaid payroll taxes.
- The IRS can attach a tax lien on your property, making it almost impossible to sell the assets and destroying your credit in the process.
- The IRS can levy your bank accounts, leaving you with cash flow insufficient to operate the business and with substantial banking fees.
- The IRS can seize your assets, including real estate, tools, equipment, and vehicles, meaning that you are without means to produce income.
- The IRS can divert payments from your clients directly to the IRS to be credited toward your tax debt, which can ruin your relationship with your clients.
- Because liquidating your assets poses such a costly, time-consuming option, the IRS may simply choose to force business closure.
- And in extreme cases, the IRS can hit you personally with substantial Trust Fund Recovery Penalties and recommend that the IRS Criminal Investigation Division file charges against you.
Of course, the most responsible course of action regarding payroll taxes is to ensure that your business always remains in compliance with all tax laws.
But if your business does experience payroll tax difficulties, your safest route to resolution is to consult a tax attorney. Solutions that exist for personal tax debt aren’t always available for payroll tax issues. For instance, the IRS might turn down an Offer in Compromise, since the IRS might judge that the business is worth more than the tax owed. Installment agreements for businesses are normally negotiated in great detail before settlements are reached. In both cases, your books will be opened for examination. And if the IRS has reviewed company records and determined that you should be held personally liable for the outstanding debt, your private assets are at risk.
At Law Offices of Christy Lee, P.C., we will:
Assess your current tax liability and financial circumstances.
Review business records involving the tax liability.
Consider all possible alternatives to achieving successful resolution.
Engage with the IRS on your behalf concerning the most feasible solution to the payroll tax deficiencies.
Negotiate with the IRS involving tax liens, levies, and seizures of assets, so that the company can generate profit.
Fight to protect your personal assets against potential seizure for business debt.
And advise you as to the optimal ways to avoid falling into noncompliance in the future.
As a tax boutique, Law Offices of Christy Lee, P.C., will assist you with all tax issues relevant to your business operations. Our staff are knowledgeable about IRS procedures and the best methods for obtaining a fair and equitable resolution to your tax issues. We will analyze all business records to ensure your compliance with the Internal Revenue Code, and we will advise you about preferred bookkeeping methods, so that your business remains a viable economic entity. We will carefully screen your IRS filings for accuracy.
Don’t let your payroll tax matters become so dated that there are few remaining options to deal with a complicated and extremely costly situation. Give us a call immediately if your business faces complicated issues involving payroll tax. Then you can focus on what matters – the efficient and productive management of your company.