Victory Tax Solutions
“America’s Trusted Tax Team”
What is IRS Payroll Tax Debt? IRS Payroll Tax Debt is money owed to the IRS for failure to withhold and/or pay required taxes on behalf of your employees. Who is an employee? If you have the right to control what a worker does and how they do it, likely they can be considered your employee.
Most employers must withhold, deposit, report and pay several different types of employment taxes. These taxes include Income Tax, FICA and FUTA:
- Income Tax: Money owed by the employee individually, taken from their wages to foster timely payment.
- FICA: Social Security and Medicare taxes owed to the government. Half of the tax is owed by the employer, and half is owed by the employee.
- FUTA: Federal unemployment tax, owed by the employer.
To determine how much federal income tax to withhold on behalf of your employees you should look at the W-4s you have on file for your employees. You can encourage your employees to file new W-4s at the beginning of each year, especially if they owed taxes on their most recent return.
Once you have properly withheld taxes from your employees these taxes have to be deposited and reported. At the end of each year a W-2 has be prepared for each of your employees that reports wages, tips or other compensation.
It is extremely important as an employer that you withhold correctly and deposit the withheld taxes in order to avoid IRS Payroll Tax Debt. One form of IRS Payroll Tax Debt is a Trust Fund Recovery Penalty. A Trust Fund Recovery Penalty (TFRP) is assessed against the owner or manager in charge of employment personally. It does not erase or transfer the debt owed by the company, it just doubles the overall amount owed to the government.
The Trust Fund Recovery Penalty can be imposed on any person that the IRS determines to be responsible for paying, collecting, or accounting for the taxes and acted willful in not doing so. A responsible party can be a partner, sole proprietor, office of the corporation, or an employee of the business. If the responsible person pays other business expenses instead of withholding taxes the IRS can find that you willfully failed to pay taxes and impose a Trust Fund Recover Penalty. The penalty is the full amount of the unpaid trust fund tax plus interest.
It is important that you try to avoid Trust Fund Recover Penalty by making sure employment taxes are collected and paid to the IRS timely. Additionally, if the IRS is proposing an assessment of TFRP, or has requested an interview, you have the right to be represented through that process. Defending yourself against TFRP assessment can be tricky, as the IRS looks at many factors to reach their determination. Tax Attorneys are typically skilled in these situations, and may help taxpayers avoid significant personal payroll tax debt.
If you are having issues with IRS Payroll Tax Debt it is important you contact a Tax Attorney right away. Here at Victory Tax Solutions we dedicate ourselves to helping employers with Payroll Tax Debt or Trust Fund Recovery Penalties.
Call Victory Tax Solutions today to speak with one of our account executives. The call is toll free 1-877-772-0123.