Settlement of Back Payroll Taxes
When small businesses get into cash flow trouble, they often look to see which expenses they can put off to keep the doors open and the lights on. Unfortunately, this all too often results in them failing to remit the payroll taxes that they withhold from their employees’ paychecks to the IRS. They honestly expect to make up for this shortfall with the next pay cycle, but it usually becomes much easier to continue in the same pattern – especially when there is no immediate response from the IRS.
Over time this problem snowballs, and these small businesses dig themselves into a deeper and deeper hole. This can be an especially difficult problem to resolve, and the potential penalties involved can often be overwhelming. In particular, the Trust Fund Recovery Penalty, or TFRP, is often assessed against all responsible persons and can amount to 100% of the tax owed.
In recent years the IRS has stepped up enforcement in this area and they have been increasingly aggressive. Technically, an employer is only withholding those amounts from employees’ paychecks in trust for the IRS – and the IRS is very unsympathetic when that money is not turned over to them.
Navigating the settlement of back payroll taxes should not be undertaken without help. Our experience allows us to negotiate on your behalf and attempt to reach a result that enables you to catch up on your prior obligations while keeping your business open. But don’t wait too long! Failing to address this problem can result in financial ruin and the loss and/or closure of your business.