Guidance for Business Owners Behind on Payroll Taxes

Falling behind on payroll taxes is relatively common for business owners.  In this economy, business owners find themselves relying on large accounts to pay their bills on time, and if they do not, the wages and payroll taxes deposited can be affected. If you own a business and find that you cannot pay your payroll taxes to either New York State or the Internal Revenue Service, there can be a solution to this style of tax problem.

Business owners who fail to file and/or pay payroll taxes in a timely manner may face tough enforcement action from the IRS and the New York State Department of Taxation and Finance.  For the IRS, payroll taxes are a trust tax, meaning that it is the obligation of the employer to collect federal withholding and FICA, and deposit this money to the IRS.  Therefore, failure to file payroll or filing late payroll tax is viewed as theft, and the IRS will accelerate its collection and notice process.

If you are a business owner with delinquent payroll taxes due the first step is to file all unfiled returns.  This goes for income tax returns as well; the most important and easiest way to begin to fix any tax issue is by filing past due returns.  You should prepare and file any past due payroll tax returns with the IRS and New York even if you are unable to pay the back payroll taxes owed.  Business owners should also pay current payroll taxes, and stay current with future payroll tax filings and deposits.

It is important to resolve payroll tax issues as quickly as possible.  If a business owner does not act quickly, they face the risk of their business being closed down.

One way to keep a business open even as it faces payroll tax issues with the IRS or New York state is with the help of an experienced tax attorney to create a tax installment payment agreement.  Business owners have the same rights as individual taxpayers and can attempt to negotiate an installment agreements or an Offer in Compromise.  However, unlike for personal income tax issues, the IRS is less likely to accept either of these tax payment plans because they both view the tax liability as a trust fund.  Installment agreements are difficult because the IRS wants the tax debt owed immediately, not spread out offer a couple of years.  For an Offer in Compromise a business has to have fewer assets, and the IRS has the option to let the business owner settle tax debt for less than the taxes owed.  Unfortunately, this is uncommon because the IRS will normally assume that the business is worth more than the tax debt owed. Having an experienced attorney who understands the tax laws negotiate payroll tax issues is the best course of action to find an agreement with the IRS.

For business owners facing payroll tax issues, it is best to be very proactive.  Waiting for the IRS or New York State to contact you means that a civil and possibly criminal investigation has already started.  By working with an experienced tax attorney for payroll tax problems and payroll tax help, you will be able to stay in front of your issues and negotiate a settlement for unpaid payroll taxes.

By: Timothy S. Hart