Don't wait.
Contact us now.
We can help. If you continue to ignore the problem, it
will only get worse; much worse. If you wait too long,
you can lose your rights to challenge the tax
assessment.
The IRS continues to
use Enforced Collection when it comes to unpaid
payroll taxes and unfiled payroll returns. Enforced
Collection can include a levy on the assets of the
business, including the accounts receivable, equipment,
automobiles and the bank account. The IRS can also
close a business for non-payment of payroll taxes.
If the business is closed or files for bankruptcy
protection, the IRS will look to the owner of the
business for collection of the penalties, interest,
taxes and trust funds. In the case of a corporation or a
partnership, the IRS will look to the person
responsible for paying the payroll taxes to collect
the trust funds. This is known as the Trust
Fund Recovery Penalty.
For many businesses,
when they start to have financial problems one of the
first things to happen is the payroll taxes are not paid
on time and the payroll returns are not filed on time.
Both of these are among the worst things to do when a
business has fallen upon hard times.
Failure to Pay Payroll
Taxes on Time
When a business fails
to pay the payroll taxes on time, penalties and interest
start to accrue. This causes additional cash flow
problems for the business when cash is such an important
commodity.
Late Filing of Payroll
Returns
If the payroll
returns are not filed on time the penalties are
substantially increased. Failure to file a return on
time can incur penalties of 5% per month to a maximum of
25%. Add that to other penalties, along with the
compounded interest and you can have a very serious tax
problem.
Trust Fund Recovery
Penalty
IRC Section 6672(a):
Any person required to collect, truthfully
account for, and pay over any tax imposed by this title
who willfully fails to collect such tax, or
truthfully account for or pay over such tax, or
willfully attempts in any manner to evade or defeat
any such tax or the payment thereof, shall, in addition
to other penalties provided by law, be liable to a
penalty equal to the total amount of the tax evaded, or
not collected, or not accounted for and paid over.
This is commonly
known as the 100% penalty. The penalty is
assessed for the Trust Funds not paid. Trust funds
are the money you withhold from an employee's
paycheck, which includes federal income tax and the
employees' share of FICA and Medicare. This money is
held in trust until you pay it to the Internal Revenue
Service.
Who is a
responsible person? It may be the person who has the
power to direct the collection of trust funds, the power
and authority to pay trust funds and other creditors, or
power and authority to determine who gets paid first or
last.
According to the
IRS, a responsible person
is a person or group of people who have the duty to
perform and the power to direct the collecting,
accounting and paying of trust funds. This person may
be:
