Unpaid payroll taxes can result in aggressive IRS action. The IRS treats these liabilities seriously because they involve trust fund taxes—amounts withheld from employees’ paychecks that are required to be remitted to the government. Business owners, officers, and even certain employees may be held personally liable if these taxes go unpaid.
Common Payroll Tax Issues
- Missed federal tax deposits
- Late or missing Form 941 or 940 filings
- Misclassification of workers (employees vs. contractors)
- Underreported wages or incorrect filings
Consequences of Noncompliance
- Penalties and interest that increase rapidly
- IRS levies and liens on business assets and bank accounts
- Trust Fund Recovery Penalty (TFRP), which can impose personal liability
- Business shutdowns or license revocations in severe cases
Resolution Options
- Installment Agreements: Allows the business to repay taxes over time. Can be negotiated based on cash flow.
- Offer in Compromise (OIC): Settle for less than the full amount if you can prove that full payment would cause financial hardship.
- Penalty Abatement: Relief may be available if you can show reasonable cause for the failure to pay or deposit.
- Innocent Party Defense: Certain individuals may avoid personal liability by proving they were not responsible for the noncompliance.
- Currently Not Collectible (CNC) Status: Temporarily suspends collection actions for businesses in financial distress.
How a CPA Helps
- Analyzes IRS notices and computes actual liability
- Prepares and negotiates installment or compromise agreements
- Communicates directly with IRS revenue officers on your behalf
- Helps protect business assets and maintain operations during resolution
Facing payroll tax issues? Contact us for immediate, experienced guidance. We’ll help you assess your options and work toward resolution.