Did you know ...if you have employees working in your business, and you haven't paid payroll taxes, you can become personally responsible for those taxes?
Even if the business itself ceases to exist, you can be assessed for the tax debt.
How is this possible?
Everyone knows that real estate sales is seasonal.
Sales can be seasonal. Commission income and cash flow can be great some months, and not so great in other months
Unfortuntely, one of the easiest sources of cash when money is tight is federal payroll taxes.
It's been called the easiest loan to get, but the hardest to repay.
You don't even have to apply for a "loan". The funds are sitting right there in your bank account!
I'm referring to money withheld from employee checks this month, sitting in your bank account, and waiting to be paid as a federal payroll tax deposit next month.
The portion of payroll taxes that can be assessed to you personally
Employee withholdings for federal income tax, social security and medicare are what the IRS calls 'trust funds'. It's employee money, which you've collected and held in trust - as part of the payroll process - to be forwarded to the government.
Ultimately, if you are the person responsible for payment of these funds, and you are willful in your failure to make the payment, the IRS can determine that you are liable.
It's a joint and several liability. The IRS will assess anyone and eveyone responsible and willful in the non-payment of the trust fund portion.
If the business pays the liability, you're off the hook. If another individual, business partner, or CFO pays the liability, you're off the hook.
How to defend yourself from individual assessment
The IRS must determine who's responsible and willful for the non payment. This is done through what is called a 4180 Interview.
The interview is done by phone, but Form 4180 is not available online, and the IRS Revenue Officer is not permitted to show you one.
Bottom line, it's up to you to know your responsible and/or willful defense going in to the interview. If you don't know the process, or how to craft the best defense, it would be wise to get professional representation by someone who knows the process and Internal Revenue rules (IRC 6672) which govern the process.
If you need help with the Trust Fund Recovery Penalty process, or have questions, I can help.
Contact me to learn your options and determine your best 'next steps', end your IRS stress, and even settle for less.
I specialize in assisting taxpayers in trouble with the IRS, and am well acquainted with navigating the IRS Collections and Trust Fund Recovery Penalty processes. If you have questions, contact me at 757-346-1040 or firstname.lastname@example.org.
I've also created a video to explain this: https://youtu.be/9hVGR15zovU