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Rogue Valley Tax Tips and Insights: Help! I owe back Payroll Taxes!

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 post we wrap up our discussion pertaining to Payroll Tax Problems and the Trust Fund Recovery Penalty for now. To recap, the Trust Fund Recovery Penalty is not a true penalty in the sense that it is an addition to the tax that is owed, it is simply 100% of the trust funds that were not paid to the government that is being assessed against the individual(s) that the IRS deemed to be the Responsible Person(s). This is done to ensure that even if the business fails and declares bankruptcy, the government can still collect the portion of the Payroll Tax that was withheld from employee’s paychecks that the responsible party had no right to keep. The trust fund portion of the Payroll Taxes that are assessed via the Trust Fund Recovery Penalty also cannot be discharged in a personal bankruptcy proceeding. This means that an individual that was responsible for remitting the trust funds to the government can’t keep this money, declare bankruptcy, and get out of their responsibility to properly account for, collect, and remit to the IRS the portion that employees had withheld that were intended to be paid on their behalf.

Anyone that is deemed to be responsible for the Payroll Taxes is jointly and severally liable for the tax owed. The IRS is not required to pursue the collection from the company first, they can simultaneously pursue the individuals that are responsible. In order to be held liable for the trust funds, the person(s) must be proven to have willfully failed to remit the taxes and to have been responsible for paying them. The IRS process for determining who to assess the Trust Fund Recovery Penalty against includes issuing a summons to obtain bank records and bank signature cards to evidence who signed the checks, reviewing filed returns to evidence who signed payroll and business tax returns, interviewing employees and owners or key officers of the company, and ultimately making their determination of who is responsible. The interview of the employees and key individuals in the business is conducted with Form 4180. The questions on this form are very broad and when answered in person by the interviewee can lead to a determination of responsibility even when those individuals had no authority to actually choose what payments were made or not made by the company.

If you are facing Payroll Taxes that are owed, have already been contacted by the IRS about these back taxes, or especially are facing a 4180 interview, you would be well advised to seek competent representation in the matter. The responses that are given to the IRS in this process can be very damaging if not provided in full context with clarification in a written record, and can create a significant uphill battle, even if you were not actually in a position of authority to decide if the Payroll Taxes were paid properly. Simply paying other creditors when holding tax funds and having knowledge of the obligation to pay the taxes owed is sufficient for the IRS to establish that the taxes went willfully unpaid!

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!