The Internal Revenue Service (IRS) looks harshly upon employers who owe payroll taxes! It does not matter that the business may have suffered financial losses and was unable to pay it payroll tax obligations.

The federal and state taxing authorities treat the non-payment or late payment of payroll tax liabilities by employers much differently than other taxes you may owe. Employers who withhold payroll taxes from it employees assume a fiduciary duty of the remittance of these taxes on behalf of its employees. It is this reasoning that is applied which provides for special treatment of payroll taxes.

When a Business Fails to File or Pay Its Payroll Taxes

When many businesses start to have financial problems one of the first things that happens is the failure to pay payroll taxes or file its payroll returns on time. This is all too common!

To begin, the IRS will begin by mailing a series of letters reminding taxpayers of the late or delinquent filing of the returns or payroll taxes. Similarly, ridiculously high penalties will begin simultaneously.

When the not-so-friendly reminder letters have no response (as they most often do), the IRS will take more serious actions in the enforcement of this collection. Collection activities generally begin with placing a lien or levy monies from taxpayer’s bank accounts. A levy is where the IRS contacts the taxpayer’s financial institutions and demands the release of monies necessary to satisfy all or a portion of the tax obligations. Your bank accounts are generally frozen until the funds are released.

To the extent there is not enough cash to satisfy the debt, the IRS may also levy business assets including accounts receivable, equipment, automobiles, etc. Just when things are not bad enough, the IRS is contacting your customers demanding payment of taxes. Good luck trying to salvage this business relationship!

When all else fails, the IRS will look beyond the business to any and all individuals that may be responsible for the filing of tax returns or the remittance of payroll taxes. These responsible persons include business owners, and even employees who have financial control over bank accounts and the hiring and firing of employees. It generally does not matter that the business or its owners have filed bankruptcy, or one person is more responsible than another for this obligation. The IRS will seek collection from any and all available sources for the payment of these taxes.

What to Do When You Have a Payroll Tax Problem

The first, most obvious action you can take is to pay your taxes! As simple as it may seem, the payment of your taxes, or partial payment with an intent to pay your taxes is the best approach.

When you just can’t pay your taxes currently, you may also arrange to pay these taxes over time. The IRS has the power to collect these taxes for a long time and will patiently wait. This is not to say that you can just agree to pay your taxes over whatever time period you wish – the IRS will determine what they believe you can pay and how quickly you can pay it.

The most important point here is you must be proactive. Do not wait for the IRS to come to you! Obtain professional representation, reach out to the IRS, explain the problems you are having, acknowledge your obligation and arrange to pay or settle your account.

How We Can Help You

Professional representation is important in almost any tax matter. The correction of tax deficiencies and obligations requires a significant amount of paperwork and planning. You need people working for you that are knowledgeable of tax law and experienced in working with the IRS.

Not anyone can represent you. Only tax attorneys, certified public accountants and others are specifically licensed for IRS representation in these matters. Hiring a tax professional will save you time, money and a lot of unnecessary aggravation. Your efforts are better concentrated on your business — not dealing with the IRS!

A tax representative creates a buffer between you and the IRS. No sleepless nights, no annoying phone calls, no agents just showing up at your door. You have the ability to remove yourself almost entirely. Get your life back and get back on track!

We can review your tax returns and IRS penalty calculations and often help obtain adjustments in your favor. Similarly, we can often help you to obtain relief from penalties where justifiable reasonable cause may exist.

We can help negotiate reasonable payment terms and conditions that you can live with. In some cases, where it appears you just can’t pay what you owe, we can get your taxes reduced to an amount you can afford.

We help determine if you’re doing everything correctly and what your other exposures may be. Are you paying individuals who are not employees? Are these individuals really independent contractors or would characterizing them as employees be more appropriate? What about paying individuals who are subject to withholding? Did you do what’s required to verify the person you hired is able to work? What steps can you do to avoid a payroll tax examination? What about bonuses? Vacation? Other benefits?

Hiring a qualified professional is not a matter of choice — it is a matter of good business practice. Hiring a professional can be costly — not hiring a professional may cost your even more! Your previous tax preparer may not be the one best qualified to represent your interests. Inquire as to professional credentials, education and most important, experience in payroll representation matters before the IRS.

There are many things you can do to solve these problems. Be proactive! Call us today!