One of the worst tax violations is an employer’s failure to remit payroll taxes it has withheld from its employees’ pay. But despite its gravity, failure to pay payroll taxes is one of the most frequent IRS tax problems we encounter.
The IRS is required by law to give employees the benefit of all taxes withheld by their employers whether or not such taxes were remitted to the government. In short, when an employer fails to turn over withheld taxes the IRS loses money.
The payroll taxes an employer holds back from an employee (the “Trust Fund”) never belong to the employer, but rather are held in a constructive trust for the federal government.
Thus, every employer is a Trustee whose sole beneficiary is the United States. As a Trustee, the employer has a fiduciary duty to properly report and turn over all withheld taxes.
If you don’t pay over your payroll taxes the IRS considers it to be a theft of government funds and may impose civil penalties, criminal fines and other criminal sanctions.
Call us at 407.915.3470 and let us help you solve the IRS problem.
Employers who are behind in their payroll tax deposits can count on immediate and aggressive collection action by the IRS.
There is good reason for this: The IRS is concerned that a delinquent payroll tax employer who is still in business will continue to use the Trust Fund for its own purposes.
The IRS calls the continued failure to remit payroll taxes “pyramiding” and if you keep doing it the IRS will shut down your business and you could end up in jail.
Fortunately, there is a solution. If your business can show that it has corrected the problem and is now keeping current with its payroll tax deposits and can show that it is profitable enough to allow it to remain current and make payments on the unpaid payroll taxes (plus penalties and interest), the IRS will consider an Installment Payment Plan that will allow you to remain in business.
The IRS is empowered to assess a penalty against individuals who are deemed responsible for the failure of the business to remit payroll taxes. This penalty is known as the Trust Fund Penalty or 100% Penalty.
This penalty is called the Trust Fund Penalty because it imposes a fine that is equal to 100% of the portion of the payroll taxes that was withheld from employees’ pay and held in trust for the government.
The IRS often assesses the Trust Fund Penalty against people within the organization who were neither shareholders nor officers.
The Trust Fund Penalty may be assessed against more than one individual.
The IRS audited my 2007 and 2008 tax returns and disallowed 100% of my business expenses because the auditor said I didn’t have sufficient records. I hired The Pappas Group and they were able to prove by other means that my deductions were valid and the IRS ended up only disallowing about 15% of my expenses. Had I not hired Pappas I would been assessed taxes, penalties and interest in excess of $100,000. The Pappas group now does all of my accounting work and prepares both my business and personal tax returns.