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Back Payroll
Taxes
How
Can This Happen to You?
Sometimes a business owner runs into financial difficulty and
does not pay the withheld taxes... not because they are trying
to evade, but because they simply can't pay money they don't
have. Of course they intended to catch up on the payroll taxes
as soon as enough money came in, but the money never showed up.
Does this sound like something that has happened to you?
The IRS is very aggressive in its efforts to collect past due
payroll taxes. The penalties assessed on delinquent payroll tax
deposits or filings can dramatically increase the total amount
owing in a matter of months.
What
Can Happen to You, Your Family and Your Business?
If you owe payroll taxes, not only is your business at risk--you
may be personally liable, as well. Once the IRS has determined
the business cannot pay its past due payroll taxes, they then
turn their sights on the individuals who they believe are
responsible.
The
100% Trust Fund Recovery Penalty (TFRP)
To
encourage prompt payment of withheld income and employment
taxes, Congress passed a law that provides for the TFRP. The
portion of payroll tax liability that is withheld from an
employee’s paycheck is called the “trust fund” portion
because you actually hold the employee's money “in trust”
until you make a federal tax deposit in that amount. The TFRP
may apply to you if trust fund taxes cannot be immediately
collected from the business. The business does not have to have
stopped operating in order for the TFRP to be assessed.
Who
Can Be Held Responsible for the TFRP?
The TFRP may be assessed
against any person who:
·
is
responsible
for collecting or paying withheld income and employment taxes,
or for paying collected excise taxes; and
·
willfully
fails
to collect or pay them.
A responsible
person is a person or group of people who has the duty to
perform and the power to direct the collecting, accounting, and
paying of trust fund taxes. 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;
·
another
person with authority and control over funds to direct their
disbursement; or
·
another
corporation.
For willfulness
to exist, the responsible person:
·
must
have been, or should have been, aware of the outstanding taxes;
and
·
either
intentionally disregarded the law or was plainly indifferent to
its requirements (no evil intent or bad motive is required).
Using available funds to
pay other creditors when the business is unable to pay the
employment taxes is an indication of willfulness.
You may be asked to
complete an interview in order to determine the full scope of
your duties and responsibilities. Responsibility is based on
whether an individual exercised independent judgment with
respect to the financial affairs of the business. An employee is
not a responsible person if the employee's function was solely
to pay the bills as directed by a superior, rather than to
determine which creditors would or would not be paid.
Figuring
the TFRP Amount
The amount of the penalty
is equal to the unpaid balance of the trust fund tax. The
penalty is computed based on:
·
The
unpaid income taxes withheld; plus
·
The
employee's portion of the withheld FICA taxes.
For collected taxes, the
penalty is based on the unpaid amount of collected excise taxes.
Assessing
the TFRP
If the IRS determines that
you are a responsible person, the IRS will provide you a letter
stating that the IRS plans to assess the TFRP against you. You
have 60 days after the IRS delivers the letter to appeal their
proposal.
Caution:
Once the IRS asserts the
penalty, the IRS can take collection action against your
personal assets. For instance, the IRS can file a federal tax
lien or take levy or seizure action.
I know how to protect you and your business from
aggressive IRS collection activity.
I
help business owners every day, with great success. I can design
a plan for repayment of taxes and negotiate with the IRS to
avoid bank levies and asset seizure.
Often, the
only way to resolve a TFRP is through an Offer in Compromise.
If you need help with
unpaid taxes don’t delay. Delay only makes the problem worse.
Ralph
Sayers, CPA
(877)
316-4331
ralphs@tampabay.rr.com
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