If your business can make its payroll and pay vendors but somehow neglects to pay federal income withholding taxes and the employee portion of FICA (Social Security and Medicare) taxes, it’s important to seek the counsel of qualified tax attorneys immediately. Our legal team at Huntsman | Lofgran, PLLC helps companies avoid or at least minimize IRS Form 940 and 941 (annual and quarterly) federal tax return issues that can hold their operations back, or worse, put them out of business. We offer Utah businesses resourceful legal counsel, attentive, personalized and thorough service, and tough, proven courtroom representation.
The IRS and Utah State Tax Commission are perhaps at their most aggressive regarding collecting unpaid payroll taxes. While Chapter 7 bankruptcy — and Chapter 11 as well — may help individuals and some small businesses with certain taxes, payroll taxes owed are not on the table for tax relief negotiations, so bankruptcy is not a strategy for dealing with them.
Payroll taxes are not the property of the business but, rather, represent other people’s tax payments. The IRS would just as soon levy your business’s assets and liquidate them than allow you to continue to fall behind on payroll taxes.
If you are a business owner and get substantially behind on payroll taxes, then as a “responsible party,” you are fair game for assessment by the IRS of the civil penalty known as the Trust Fund Recovery Penalty. However you don’t need to be the owner — responsible parties are considered anyone in the business who is charged with accounting for what taxes are owed, collecting the funds and then paying them to the IRS. This might include partnership members, board members, officers, controllers, human resources professionals, or even outside vendors and their employees who are responsible for administering the payroll.
Meeting with the IRS, even in good faith, may not be an appropriate first step in response, because any meeting could be deemed a Non-Assertion Interview, conducted to determine who is responsible for paying the Trust Fund Recovery Penalty. It’s not just the business the tax authority can pursue for unpaid payroll and withholding taxes, but also the personal assets of responsible parties. The government can go after your personal asserts even if you work for a corporation.
At Huntsman | Lofgran, PLLC, our legal team helps businesses respond to Trust Fund Recovery Penalty letters within the 60-day deadline. Our experienced tax attorneys meet with you or your in-house legal team to consider an appropriate initial response, including the filing of an appeal. To arrange for a free initial consultation regarding your unpaid payroll taxes, call us at 801-474-0031 or contact us online today.