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Rogue Valley Tax Tips and Insights: Wait, I stole from the government?

By
Education & Training with First Response Resolution, LLC

Welcome to the Tax Tips and Insights series of First Response Resolution, LLC’s official blog! We are a specialty tax firm practicing right here near Medford in Southern Oregon and the focus of my practice is solving tax problems for individuals and businesses and representing taxpayers before the IRS and State Departments of Revenue. We offer our services online nationwide from the comfort of our client’s homes and will provide services on-site to businesses in our area upon request. Think of our firm as your Financial First Responders who specialize in saving troubled taxpayers. We help people who are struggling with tax problems get their lives back on track so they can focus on what matters most to them.

In this series of posts in our Tax Tips and Insights, we begin to cover the important area of Payroll Taxes! Payroll taxes are a very important area of taxation and one that the IRS takes very seriously. The taxes paid to and collected by the United States Government are in the trillions of dollars each year and represent more than 70% of all taxes collected. The Federal Insurance Contributions Act (FICA) enacted in 1935 mandates a payroll tax on the paychecks of U.S. employees and an employer matching portion, both of which must be reported and remitted to the government on a timely basis, determined by the size and frequency of the employer’s payroll. FICA consists of a tax for Social Security of 6.2% and Medicare of 1.45% that are withheld from an employee’s gross pay each pay period which are matched by the employer, totaling 15.3% on wages paid to employees. Those who are self employed refer to these taxes as Self Employment Tax and pay these taxes through quarterly estimated tax payments.

When acting as an employer in paying your employees, you withhold these amounts of tax from the employee’s paychecks. These amounts withheld are referred to as “Trust Funds” due to the fact that you are holding these funds in trust for the United States Government and are expected to remit these withholdings timely to maintain compliance. Employment taxes are a critical source of funding for the government to continue to administer the Social Security and Medicare programs that older and disabled Americans rely upon. Once these taxes are withheld from an employee’s paycheck, the employee is considered to be compliant, and the employee gets full credit for the remittance of these taxes. If an employer fails to timely pay these taxes withheld, they are jeopardizing not only their business, but potentially their freedom as this is considered to be the same as stealing money from the government.

Congress created Internal Revenue Code (IRC) § 6672 to protect this source of revenue which allows the Commissioner of the Internal Revenue Service to assess a penalty against individuals and/or businesses who are responsible for accounting for and paying these payroll taxes and willfully failed to do so. The penalty is equal to 100% of the trust funds taxed that were not properly remitted by the employer, however, the employer portion of employment taxes are not considered to be trust funds. The Trust Fund Recovery Penalty is assessed against the individual(s) of the business that are deemed to be responsible for truthfully accounting for and paying these taxes and follows the individual(s) even if the business fails and goes bankrupt. The willful failure to remit the payroll taxes can also be asserted to be a criminal act. IRC § 7202 makes it a crime punishable by both a fine and/or incarceration for the responsible parties that willfully try to evade reporting and paying over the trust funds to the government. The IRS can pursue both civil and criminal penalties! The Trust Fund Recovery Penalty is also NOT dischargeable in bankruptcy! If you are behind on paying your employment taxes, you need to resolve this serious matter and seek professional representation as soon as possible.

If you or someone you know is in the midst of an IRS issue, contact me at either 541-293-8449, by email at zach@firstresponseirs.com, or through our website. We specialize in solving tax problems! We will thoroughly investigate and evaluate your specific situation and consider ALL OPTIONS available to you. All discussions are kept strictly confidential, and we offer no obligation initial consultations of up to one hour.

Is your agency interested in having me speak to your team of realtors in person or over Zoom at one of your weekly sales meetings free of charge? I have a presentation developed to address the following:

  1. Taxation and your clients,
  2. Tax tips for saving on your own tax returns, and
  3. Tax Problem Solutions.

 

Contact us today!