Unpaid Payroll Tax

Owing payroll tax and having unfiled payroll tax returns are serious issues.  If left alone, payroll tax problems can lead to the close of a business.  Just as bad, you can be held personally responsible for about half of the liability.  Due to COVID-19, more businesses are now experiencing payroll tax issues.

“Borrowing” Your Company’s Payroll Withholding is a No-No

A company typically withholds about 8% of their employee’s pay to cover the employee’s portion of payroll taxes.  In addition, it is not uncommon to withhold an additional 20 -30% (or more) in Federal and State income tax withholding.  If a company pays $100,000 per period in salary, that could easily equate to $35,000 in withholding.

Now assume the company is having issues related to COVID or otherwise.  Also assume that the company has not remitted the withholding to the government.  Practically speaking, it would be easy to access these funds.  The problem is, they are not yours to use…and the IRS knows this.

For this reason, unpaid payroll tax is taken very seriously.  If payroll taxes go unpaid, the IRS will determine who is the “responsible person” or persons that allowed the tax not to be paid.  Once they determine who is responsible (it can be more than one person), they assess this portion of the payroll tax including penalties and interest to the individual/s personally in the form of a Civil Penalty.

It is important to know that penalties and interest on payroll taxes grow much faster than other types.  It is not unusual for a company’s payroll tax liability to double in less than a year.

There is a Way Out

If you are unable to catch up on unpaid payroll tax, the IRS will allow you to stay in business if you can (1) stay current with payroll taxes going forward and (2) make installment payments based on your ability, not on the amount you owe.

In addition, if the Civil Penalty has not been assessed, you may be able to limit who is considered a responsible person.

If you try and negotiate on your own, you are most likely going to have anyone that could be considered responsible, be assessed the Civil Penalty.  You also are likely to get into an agreement that is impossible to pay let alone maintain.  This is where having the right professional makes all of the difference in the world.

If you have these types of issues, do not wait to show up to work and find your company’s doors padlocked.  Deal with the problem now.  This will give you time to plan so you are in the best position when the time comes to negotiate with the IRS.

Contact the Tax Resolution Institute to see if it makes sense to utilize our services.  If not, your time will be well spent when you apply the guidance we provide.  Call (800) 658-7590 or email us at info@taxresolutioninstitute.com and get the help you need.

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