Payroll Employment Taxes
Non-payment of Payroll Taxes by a business is considered by the IRS to be their number one priority for collection actions. A business must stay current on their Payroll Tax or the IRS will not allow them to continue to operate.
If an owner operates his business as a sole proprietorship or general partnership and fails to pay his Payroll Tax, the business assets as well as the owner’s personal assets are subject to the IRS Lien. The IRS can seize and sell all business and personal assets of the business and owner to collect the total tax, penalties and interest owed.
The main reason for forming a corporation, limited liability company or limited partnership is to shield the personal assets of the owners, stockholders and officers. However, when it comes to Payroll Taxes, personal assets are not always shielded from the long arm of the IRS. The Payroll/employment/941 Tax owed by one of these entities is comprised of Trust Fund Tax and Non-Trust Fund Tax. The Trust Fund Tax consists of the income tax and fica/mc withheld from the employees of the business. The Non-Trust Fund Tax is the employer’s portion of the fica/mc. In the following paragraphs when we refer to a business, we are referring to corporations, limited liability companies and limited partnerships, which are all subject to the Trust Fund Recovery Penalty (TFRP).
The Trust Fund Recovery Penalty (TFRP) is probably the most least understood tool in IRS’ arsenal of weapons to collect taxes from businesses but also one of the most devastating to the individuals involved with the business;. The Penalty is applicable when a business entity operating as a corporation, limited liability company and occasionally a limited partnership fails to pay their payroll or employment taxes (form 941).
The Revenue Officer that will be interviewing you will be investigating who the IRS will consider to be the “responsible person” or persons individually liable for the TFRP. The Revenue Officer will make their recommendation based on this interview. First of all, you should not personally participate in this interview with the IRS. Our clients are interviewed by our Associates, not by the IRS. In most cases, the answers you give the IRS to these questions will not be interpreted or written on the form in the same manner you gave them to the Agent. This does not work for your best interest. We can provide a complete defense to the TFRP for our clients. We will honestly tell you what we think your chances are for non-assertion of this penalty against you. If in our opinion, you will be declared a responsible person, we can also assist you in planning for the eventual assessment against you.
A field visit to a business owing Payroll Tax by an IRS Revenue Officer is a harrowing experience. TheRevenue Officer will not schedule an appointment at their office. They will not call ahead to let you know they are coming to your office. They will show up at your office, unannounced, for a face-to-face meeting with you. They will first demand full payment for all the tax, penalties and interest you owe. If you cannot pay in full, they will demand that you pay them all that is in the business bank account and give you a date for payment of the balance. They will also require a complete financial statement on your company including your bank accounts, equipment, real estate and account receivables. All sources for them to Levy at their discretion. After finishing the financial statement on the company, the Revenue Officer will conduct a TFRP interview with you as well as any other individuals potentially responsible for the TFRP. In many cases, they will also want a personal financial statement from you. This initial meeting may last two to four hours. Is this an experience to which you wish to be exposed?
If you are contacted by a Revenue Officer, either by telephone or personal contact, you should immediately tell the Revenue Officer (in a courteous and respectful way) that you do not wish to discuss your case with them and that you wish to seek representation on this matter. Do not let the preceding scenario happen to you. Any information you provide to the IRS, may be used against you.
We have developed certain strategies and planning techniques that are unique with Tax Solutions. Early planning may save your business and your personal assets. You will not meet with an IRS Agent. However, early contact with us is necessary to prevent the total loss of your business and personal assets.
Contact Us Immediately if you owe payroll tax!