Trust Fund Recovery Penalties

Payroll taxes refer to the Social Security tax and the Medicare tax. Social Security taxes are designed to provide benefits for retired workers, the disabled, and the dependents of both. Medicare taxes are designed to provide medical benefits for certain individuals when they reach age 65.

An employer could be a self-employed individual, a partnership with employees or a corporation with employees. Employers are required to withhold these payroll taxes from the wages earned by their employees and are required to forward these withholdings to the IRS. Under the Internal Revenue Code, an employer is required to collect, account for and pay taxes that have been withheld from employees’ wages. An employer is required to withhold Federal Income tax, Social Security tax and contribute a portion of Social Security tax as well. These withholdings must then be submitted to the IRS either monthly, quarterly or annually, depending on the size of the business. Additionally, if the business has employees with an active payroll, the business is required to file a Form 941, Employer’s Quarterly Federal Tax Return, and a Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return.

Failing to properly file and pay payroll taxes is a serious matter. If the employer fails to timely file and pay payroll taxes, the IRS is authorized to collect these taxes from the business or even personally from a person or persons who are responsible for withholding and paying these payroll taxes to the IRS. The IRS typically sends revenue agents to collect payroll taxes and to investigate the financial health and viability of the business. Failure to correct a delinquent payroll tax matter could result in the closure of the business by the IRS and liquidation of the business assets in order to pay the debt.

If the business is closed and payroll taxes remain unpaid, the IRS can go after the owners, or employees who were responsible for paying payroll taxes, personally. The liability can be assessed personally as a trust fund recovery penalty or civil penalty.

We represent taxpayers with payroll tax liabilities as the result of either a closed business or for a business that is a going concern. We help business owners understand and follow payroll tax obligations. Clients are provided detailed information regarding IRS requirements and regulations for employers. We can act on your behalf before the IRS. Once a business owner is in compliance with payroll tax obligations, we can assist you in reaching a resolution for the past due payroll tax liability and help the business remain compliant with IRS tax regulations going forward.


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