If you own a small business, you understand the sacrifices you have to make when business slows down. Many business owners reach a point where they purposefully neglect to hand over collected payroll taxes to the IRS because of this. If you are faced with the decision keep the lights on, you may have been tempted to do the same.
When an employer fails to pay taxes withheld and the matching employment taxes to the IRS, the penalties will be harsh and the fines will be steep.
“The most expensive of these penalties is the Trust Fund Recovery Penalty (TFRP), which is a civil penalty equivalent to 100% of the total payroll taxes owed. The IRS will go after the business, the principals of the business and anyone employed by the business that has signing power in order to collect these taxes,” wrote Bonnie Lee of Fox News Small Business Center.
In the eyes of the IRS, business owners who fail to pay their taxes are stealing from Uncle Sam, even if you want to pay but are without the means to do so.
According to a recent report by the Treasury Inspector General for the Tax Administration (TIGTA), employers owe the IRS more than $14 billion in delinquent employment taxes.
Lee writes, “The TIGTA recently audited the IRS over this issue. The report concludes that ‘TFRP actions were not always timely or adequate. Specifically, TIGTA found untimely TFRP actions, expired assessment statutes, unsupported collectability determinations, and incomplete TFRP investigations associated with installment agreement and currently not collectible cases. TFRP actions were untimely and/or inadequate in 99 of the 265 cases reviewed in a statistically valid sample. For 59 of the 99 cases, the untimely actions averaged more than 500 days to review and process the TFRP assessment.'”
This is a lot of time before each case is adequately looked over, which potentially lessens the taxpayer’s capacity to pay, and which slows down efforts by the IRS to collect taxes owed to Uncle Sam.
“Business owners who neglected remitting payroll taxes due to lack of funds can seek penalty relief by filling out IRS Form 843. But there again, it’s a long haul. I have several cases pending since last November that are just now being assigned to an examiner,” writes Lee.
To avoid this dilemma altogether, Lee advises business owners to start “pinching pennies” to make ends meet so you can pay payroll taxes by their due date. It will save you a serious headache in the end.
If you owe back taxes to the IRS, contact the tax resolution lawyer at U.S. Tax Shield. Our premier resolution attorneys can get you on the right track once again. Our A+ Better Business Bureau (BBB) rating is testimony to our quality customer care.