If your business owes payroll taxes to the government, you should be concerned. Payroll Taxes continue to become a bigger focus for both the IRS and State Governments, as governments struggle to fund budgets.
Payroll taxes remitted by employers make up approximately 70% of Federal tax inflows. Because of this, the IRS as weel as state governments, aggressively pursue businesses for the payroll taxes, and related penalties owed. In addition to taxes owed by the business, the Trust Fund Recovery Penalty (TRFP) portion, which are the employee portion of payroll taxes held in trust by the employer, can become the personal liability of those considered to be “Responsible Parties” of the business, and in some cases, “Responsible Parties” can be pursued criminally.
Solutions to Payroll Tax Debt
The solutions to Payroll Tax Debt are similar to other tax debt solutions. First, the business must be in Tax Compliance and file the required returns. The taxpayer should communicate with the IRS in an effective manner. Offers-In-Compromise , Payment Plans, and Penalty Abatement may be alternatives to resolving the tax debt. However, the potential liability of “Responsible Parties” can complicate the resolution process.
Should You Seek Representation?
I would highly recommend that taxpayers seek professional representation with Payroll Tax issues. By understanding the rules, it is possible to use limited funds in a manner, that will minimize personal exposure to the TFRP. In order to identify “Responsible Parties”, the IRS will seek Form 4180 interviews. It is critical that while you answer all questions truthfully, you also understand the implications of your answers, since there can be civil or criminal implications. A competent Enrolled Agent is a tax professional who can represent the taxpayer in the interview, guide them through the entire resolution process, and assist them in achieving the best overall outcome.
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