Unpaid Payroll Taxes

Let’s be perfectly clear about how the IRS views unpaid payroll taxes: Being the responsible party in a company for withholding payroll taxes makes you a government trustee. When working capital is tight, the most tempting solution is to borrow the payroll tax trust fund withheld from your employees. By taking advantage of the interval between payday and the day you are supposed to pay the unpaid payroll taxes to the Internal Revenue Service, you hope to give your company a little breathing room. Such thinking is nothing less than a recipe for financial disaster.

First, there is the extreme problem of personal liability. The tax code (section 6672) makes you liable “in addition to other penalties provided by law… to a penalty equal to the total amount of the tax” not accounted for and paid over. You are not even free from the amount you withheld from your employees. You can end up liable for two dollars for every dollar in unpaid payroll taxes you failed to cover. At the discretion of the IRS, criminal prosecution may augment the civil penalty. The Tax code (section 7202) makes it a felony to willfully fail “to accounts for; and pay over” taxes withheld from employees.

You can’t be held personally liable for the withheld taxes, unless: (a) you are responsible for its collection and payment. Whether as the owner of the business or a person authorized to handle its funds; and (b) your failure to collect the tax and pay it over are “willful.” You must prove the absence of at least one of elements in order to not be held responsible for the payroll tax debt and penalties. On the issue of responsibility, the courts have made it clear that you can be held liable for unpaid payroll taxes if you are in any position to exercise significant control over the payment of the funds. Whether you are called the chief financial officer or a bookkeeper, a lawyer or a junior executive, if you authorized to determine which creditors are to be paid and if you make the payments, you can be held responsible. This fact is true even if is some of those actual payments are subject to a superior’s approval. The IRS does not care about the details.

If your company has unpaid payroll taxes and you want to stay in business, contact the Tax Resolution Institute. Time is of the essence to avoid extreme sanctions by the Internal Revenue Service or the State Taxation Agencies. The Trust Fund Recovery Penalty was formally called the 100% penalty. It was not referred to as the 100% Penalty for nothing. The IRS considers that anyone who is responsible for not covering a company’s payroll tax debt as someone who is stealing from the government. It does not matter what the extenuating circumstances are or your excuses. Without dealing with the problem of unpaid payroll taxes today, not only will the IRS eventually lock the doors of the business, but also the federal government will go after your personal finances and personal assets.

An examination of the payroll tax history reveals that the problem of unpaid payroll taxes has been the downfall of many successful businesses. The IRS is not your friend, and the job of an IRS Revenue officer is to make as much money for the federal government as possible. With tax expert Peter Stephan by your side and the experienced tax attorneys and accountants of the Tax Resolution Institute, the problem of the company’s unpaid payroll taxes can be effectively addressed. Never forget that in many unpaid payroll tax cases, the IRS employs a penalty approach that is defined as Cascading Penalties.

A Cascading Penalty means that if you only missed a single payroll tax deposit, and then makes all remaining deposits on time; the IRS may still apply the next week’s deposit to the missed deposit and continues to apply payments going forward. Not only do you pay for the month you missed, but also you receive a fine that continues to increase until the amount is paid. Failure to file a return on time can incur penalties of 5% per month to a maximum of 25%. Add that to the compounded interest accrued, and you have an unpaid payroll tax debt that can lead to bankruptcy and the end of your company.

The IRS employs Enforced Collection when it comes to unpaid Payroll Taxes and unfilled payroll tax returns. Enforced Collection can be a levy on the assets of the business, including the accounts receivable, equipment, vehicles and all outside accounts. In addition, the IRS will put your private assets and finances under siege until the trust fund has been fully recovered.

The Trust Fund is the money you withhold from your employee’s paycheck, which includes federal income tax and the employee’s share of FICA and Medicare. Congress passed the Trust Fund Recovery Penalty to encourage prompt payment of withheld and collected taxes. This Trust Fund Recovery law imposes a penalty on responsible third parties. It is considered a civil penalty that only applies to collected taxes (like Social Security) and withholdings and does not apply to the employer’s portion of FICA, Medicare, 940 taxes or income taxes of the corporation.

Among tax professionals, the Trust Fund Recovery Penalty is known as the 100% Penalty. The penalty is assessed for the Trust Funds that have not been paid. If the IRS determines the business cannot pay it’s past due taxes, they shift the focus squarely on you. If you are responsible for unpaid Payroll Taxes and are liable for the Trust Fund, Peter Stephan and the Tax Resolution Institute can help by implementing a strategy for paying those taxes.

Once a local Revenue Officer is given an unpaid payroll tax case, they have complete power and authority. IRS Revenue Officers possess the power to padlock your office doors, putting you out of business without obtaining a court order. IRS Revenue Officers can seize your machinery and equipment as assets to be liquidated.

The IRS Revenue Officer has already heard every hard-luck story in the book. We help business owners understand and follow Payroll Tax rules and laws. You will be given detailed information regarding IRS requirements for employers. Once you are in compliance with Payroll Tax regulations, we help you find a resolution for the unpaid Payroll Taxes.