payroll tax debt

Payroll Tax Debt Looming

When it comes to payroll tax debt, nonprofits are far from exempt. A report issued in 2014 by the Treasury Inspector General for Tax Administration reports that approximately 64,000 or 3.8 percent of all tax exempt organizations owed at least $875 million in unpaid taxes to the federal government. Sixty-nine percent of this debt was in unpaid payroll taxes. As tax resolution specialists with experience helping nonprofits, the Tax Resolution Institute can help.

Nonprofits & Payroll Tax Debt

This amount is down from that reported by GAO in 2007 when 55,000 nonprofits were reported to owe a collective billion dollars in payroll taxes. Still, it is an impressive figure nevertheless. During and post-recession, many nonprofits experienced severe cash flow crunches. Although they made the terrible mistake of not paying their payroll taxes, there is an answer when facing a payroll tax crisis.

Given the positive nature of nonprofit organizations and their missions designed to help people, the IRS does not want to go after such companies. However, given direct orders to collect all delinquent payroll tax debts across the board, IRS Revenue Officers are going after nonprofits like never before. If you think your nonprofit is exempt from IRS collection actions, you are gravely mistaken.

Payroll Tax Debt Is Dangerous

Most of the debt is owed by a relatively few organizations. In fact, $656 million is owed by only around 1200 organizations but the range of debt is large with some owing only $100,000 and five owing more than $10 million. An additional seven thousand nonprofits owe between $10,000 and $100,000. Regardless of the size of your nonprofit’s payroll tax debt, the goal should be the immediate resolution of the tax crisis. The shadow of payroll tax debt should not be hanging like a noose over your company. Payroll tax debt is truly dangerous. It easily can mean the end of your nonprofit as the IRS will shut the doors forever and liquidate your assets in order to collect an unpaid payroll tax debt.

Kate Barr of the Nonprofit Assistance Fund has termed the nonpayment of payroll taxes one of the worst mistakes a manager can make. She reacted to the report by saying, “The report title implies a sweeping problem in the nonprofit sector. The facts and data in the report narrows to a tiny handful of serious problems that need to be handled through tax collection and enforcement processes. While the problems in the report are limited to very few nonprofits, this is a reminder to all of the obligation that nonprofit employers have to their employees and federal and state government to meet all tax filing and payment obligations.”

Payroll Tax Debt Resolution

If you run a nonprofit and you are facing payroll tax debt problems with the IRS, the time to take action is now. Please call the Tax Resolution Institute at (818) 704-1443 for a free consultation. Our goal is to help your nonprofit resolve the payroll tax debt and move forward to the goal of realizing your mission.