Payroll Tax Problems:
Delinquent Payroll Taxes and Payroll Tax Penalties FAQs
Failing to file and pay your payroll taxes is a sure way to incur the wrath of the IRS. Delinquent payroll taxes will not only generate huge IRS penalties and debt, but may be considered a federal crime. Bottom line: Past due payroll taxes can cause you to lose your business and your freedom! The penalties assessed on delinquent payroll tax deposits or filings can increase dramatically the total amount owed in just a matter of months. Generally, if you don’t take immediate action to deal with a payroll tax problems, you will find yourself out of business.
Fortunately, there’s a solution to every problem. We’ve helped businesses permanently resolve their payroll tax debt problems and protect the future of their companies. We understand that business owners need working capital and cash flow to keep their businesses running. And we know that there’s more at stake for our clients than cutting a deal with the IRS to save money – resolving their payroll tax issues is about saving their companies.
Borrowing from payroll taxes is against the law and can land you in prison.
Trouble with payroll taxes can be the downfall of many otherwise successful businesses. Yet there are small and mid-size businesses that still use the money they collect from payroll taxes to pay their operating expenses. The money collected from employees to pay their share of federal withheld tax, FICA and Medicare (Social Security) does not belong to the business and must be accounted for and paid to the government. Generally, one must make a federal tax deposit (by tax filing service, phone, or in person at a bank) 3 days after the pay date of the pay roll checks.
The IRS is very aggressive in their collection attempts for past due payroll taxes
The IRS assigns a higher priority to collecting employment taxes than income taxes. Payroll taxes are considered a trust tax, which means that it’s the employer’s responsibility to collect federal withholding taxes and the employee portion of FICA and pass this on to the IRS. Because it’s considered a trust tax, the IRS views non-payment of payroll taxes as ‘theft’ and the IRS notice process is accelerated.
- It is much more difficult to negotiate a tax settlement such as a long-term installment agreement for unpaid payroll taxes as the IRS does not really care if your business survives.
- Offer in Compromise settlements for payroll tax problems are also often rejected because the IRS may assume that the business is worth more than tax debt owed, and they use that as reason to reject the offer.
- To prevail in these Offers for payroll tax debt, the taxpayer needs representation by an expert who can analyze and effectively articulate the real value of the business, which includes taking into consideration seasonality of the business, as well as macro factors in the economy.
- For larger liabilities, the taxpayer will be required to submit a full set of financials for the business as well as for themselves, each proposal for an installment agreement is negotiated point by point
In many cases, the IRS uses what are called Cascading Penalties. This means that if you only missed a single payroll tax $10,000 deposit 12 weeks ago and then make all remaining deposits completely and on time, the IRS usually applies the next week’s deposit to the missed deposit and continues to mis-apply payments going forward. So instead of a $1,000 penalty the taxpayer is assessed a $7,000 over many quarters this mis-application on the IRS’s part can overstate payroll tax penalties by hundreds of thousands of dollars
If you owe payroll taxes and intend to go it alone, without expert representation, against the IRS, you are way out of your league. You risk losing your business, having your assets seized and being personally liable! It’s like going to court without a lawyer and representing yourself. This is only a good idea if you know the Law. Do you? We do!!