Have you received notices from the IRS informing you that they have not received your 940 or 941 payroll items?
Have you been unable to pay your payroll taxes or are you making payments on old taxes?
Did you forget to file your payroll returns?
Didn’t file your payroll returns because you couldn’t afford to pay the taxes due?
Is the IRS threatening to levy your bank account or close your business?
Has the IRS recently proposed a “Trust Fund Recovery Penalty” assessment against you as the responsible person?
If you are making payments to the IRS on previous payroll taxes, are you making the right type of payment?
Will you qualify for an Offer in Compromise or an Installment Agreement?
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 unfilled 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 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.
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:
- an officer or an employee of a corporation
- a member or employee of a partnership
- a corporate director or shareholder
- a member of a board of trustees of a nonprofit organization, or
- another person with the authority and control to direct the disbursement of funds.
The IRS may assess the penalty against anyone who is responsible for the collecting or paying withheld income and employment taxes, and who willfully fails to collect or pay them?According to the IRS, for willfulness to exist, the responsible person must have known about the unpaid taxes, and have used the funds to keep the business going or allowed available funds to be paid to other creditors.
Other standards regarding willfulness include intentional, deliberate, voluntary, reckless disregard, knowing or accidental, free will or choice.
The issues presented in determining who the responsible person is, and whether or not willfulness exists, depends upon the facts and circumstances in each case. If the taxes are not paid, the IRS will be looking for someone to penalize. It may be you.
Employment tax investigations are up 75 percent. “Criminal Investigation” has seen an upswing in employee leasing schemes and nonpayment of payroll taxes in the last 24 months. CI is interested in egregious cases involving badges of fraud, rather than nonpayment cases where employers are short of funds and decides to pay other creditors instead of the IRS. This issue is whether the funds were used to keep a business afloat or to line the employer’s pockets.”
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 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 of 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 a 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 your employee’s paycheck, which includes federal income tax and the employee’s share of FICA and Medicare. This money is held in trust until you pay it to the Internal Revenue Service.
If the IRS is planning to assess the Trust Fund Recovery Penalty against you, or if they have already assessed the penalty against you?
Do you know what your rights are?
Are you the person who should be assessed, or is it someone else?
Do you know if you have been assessed the proper amount of “Trust Funds”?
Will you lose your home, your bank account, your car or your life savings?
Will you qualify for an Offer in Compromise or an Installment Agreement?
Don’t wait. Contact Us! We can help you with the answers to these questions. Don’t ignore the problem, time is of the essence. Waiting only causes you to lose sleep and makes the problem worse, much worse. Let us get you a settlement.