If you’re a small business owner you may have experienced unpaid payroll tax problems at one time or another. Once you fall behind in making your payroll tax deposits it can be difficult to catch-up. When this happens you can expect to be contacted by the IRS seeking payment of back payroll taxes along with penalties and interest. Did you know that the IRS can even collect the trust fund portion of payroll taxes directly from the owners of a business?
At East Coast Tax Consulting Group we resolve unpaid payroll tax problems for businesses and their owners. We recently reached a successful resolution with the IRS for a business and its owner regarding unpaid payroll taxes and trust fund penalty.
Trust Fund Penalty
The business owed more than $200,000 in payroll taxes and the owner had been previously assessed the trust fund penalty. The trust fund penalty is not like most IRS penalties as it is not in addition to the tax owed. It is an assessment against the business owner of the income tax, social security and Medicare tax withheld by an employer from an employee’s wages. It does not include the employer’s matching portion of social security and Medicare tax. As a business pays off back payroll taxes, the trust fund penalty owed by its owners is reduced by the trust fund portion of the back taxes paid by the business.
Collection Information Statement
Prior to our involvement the business had verbally agreed to make monthly installment payments of $9,000. Although, the business could not afford to make these payments, the owner agreed in order to keep the IRS from levying bank accounts and seizing equipment. Before signing the installment agreement, the owner retained us to negotiate a more realistic payment plan with the IRS.
When a business requests a payment plan or installment agreement to pay back payroll taxes in excess of $25,000 it must complete and submit a collection information statement, Form 433-B. This form provides the IRS with detailed financial information about your business and requires you to provide bank statements, accounts receivable schedules, equipment and inventory information, and proof of your business expenses.
After gathering and reviewing this information, we determined the business could only afford to pay approximately $5,000 per month toward its old payroll taxes and still pay its current taxes. We negotiated with the IRS and they agreed to an installment agreement of $5,500 a month, which is substantially less than the $9,000 they initially wanted the business to pay.
We were also able to demonstrate to the IRS that the owner did not have the ability to make payments from their own funds toward the trust fund penalty and they were placed in currently not collectible status.
Due to improved business conditions and better management, the business is meeting its current payroll tax obligations and making its monthly installment agreement payment. Hopefully this will continue and our client will avoid future payroll tax problems.
If your business is facing unpaid payroll tax problems let the tax professionals at East Coast Tax Consulting Group find the right solution for you. For payroll tax help call us today at 866-550-7655.