Payroll taxes are a big reason for taxpayers needing IRS representation assistance. It is very easy for businesses, particularly small business to have a bad quarter and miss a payment with the thought of making it up by turning a good profit the next quarter of business. When that doesn’t come to pass, the large penalties and interest on top of the compiling taxes owed swells the tax liability to a very large amount in a very short time.
The IRS is allowed to recover “trust funds” withheld from an employee’s pay from “any person required to collect, truthfully account for, and pay over any tax imposed” and “who willfully fails to collect such tax, or truthfully account for and pay over such tax. or willfully attempts in any manner to evade or defeat any such tax or the payment thereof.”
The trust funds are made up of:
- Federal income tax withheld
- 6.2% Social security withheld from employees
- 1.45% Medicare withheld from employees
This is an area where the IRS will go after anyone who is deemed to be responsible, and this is a very broad and encompassing term. This covers anyone responsible for collecting, accounting, and paying taxes over to the government, and responsibility is a matter of status, duty, and authority.
Who is Responsible?
- Sole proprietors
- Partners
- Bookkeepers
- Lenders/creditors
- Accounting firms
- Parent companies
- Purchasing companies
Possible Indicators of Responsibility
- Holding corporate office
- Ownership
- Authority in the bylaws
- Hiring and firing authority
- Check signing authority
- The authority to sign and file payroll returns
Contact us before communicating with the IRS, and we can assist you in getting this issue resolved so you can move forward and grow your business.
