As a business owner you are required to withhold income taxes from your employees’ wages. You must also withhold Social Security and Medicare taxes and pay a matching amount yourself. The income taxes, Social Security and Medicare taxes you withhold are called trust fund taxes because you are treated as holding the employee’s money in trust until you make a federal tax deposit.
If your business fails to pay payroll taxes, the IRS will aggressively pursue collection action and may attempt to levy the accounts receivables, equipment, and bank accounts of your business and may even shut down the business. Whether your business closes, files for bankruptcy protection, or continues to operate, the IRS may attempt to collect the trust fund taxes from you personally. This is called the Trust Fund Recovery Penalty (TFRP).
Trust Fund Recovery Penalty
The TFRP may be assessed against any person who is responsible for collecting or paying withheld income and employment taxes, and willfully fails to collect or pay them.
A responsible person is any person who has the duty to perform and the authority to direct the collection, accounting, and paying of trust fund taxes. This person may include:
- An officer or an employee of a corporation,
- A partner or employee of a partnership,
- A corporate director or shareholder,
- A member of a board of trustees of a nonprofit organization,
- Another person with authority and control over funds to direct their disbursement.
The IRS considers willfulness to exist when the responsible person was aware or should have been aware that the payroll taxes were not being paid. Using available funds to pay other creditors and failing to pay payroll taxes is an indication of willfulness.
If the IRS assesses the TFRP against you as a responsible person you must make arrangements to pay, otherwise they can take collection action against you, including filing a federal tax lien and levying or seizing your personal assets.
Payroll Tax Resolution
Our tax resolution specialists will review and analyze both your business and personal finances, discuss all your options, and implement the solution that best resolves your payroll tax issues. With the help of our tax resolution specialists, your problems arising from unpaid payroll taxes will soon be a distant memory.
Call us today for help with your Payroll Taxes!
With over 30 years of experience, our tax professionals are here to help you obtain relief from your tax problems. Let our team of CPAs help settle your tax debt for the lowest amount permitted and solve IRS problems such as bank levy, IRS audits, wage garnishments, unfiled tax returns, IRS liens and payroll tax penalties. Proudly serving Boca Raton, Florida and elsewhere throughout the U.S. Call for your Free Consultation today!