Tag Archives: tax debt

Business Tax Debt from Back Payroll Taxes is Devastating to Staff and Owners.

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In light of the current economic slowdown and the tightening of credit, it is more common than ever for employers find themselves burdened with unpaid payroll taxes. Business owners generally match the employment taxes withheld from their employees’ pay checks and remit those to the IRS along with the standard federal and state tax withholdings.  When times are tough, it is not uncommon for an employer to delay in paying its payroll tax withholdings in the hope of being able to send them later when circumstances have improved. (thereader.com)  A business owner may simply be waiting for a contractor or client to pay an invoice or for the bank to approve a short term loan. If one of these improvements doesn’t materialize, the business can unintentionally be left unable to pay the back payroll taxes and can suddenly face a very sizable and unexpected tax debt.

No matter what the cause, delinquent payroll tax returns and unpaid payroll taxes can cause a host of problems. Some portion of a company’s payroll taxes are amounts withheld from employees’ wages to pay their share of federal withholding taxes, Social Security and FICA.  In other words, a portion of the total amount owed is actually the employee’s money that the employer is holding in trust to remit to the IRS or State Tax Agency on the employee’s behalf.  If a company fails to file a payroll tax return or pay its payroll taxes, the employee’s IRS and State accounts will not be credited at tax filing time. 

Because payroll taxes include amounts withheld from an employee’s wages and held in trust by the employer, the IRS pursues collection of a payroll tax debt much more aggressively than it does other tax delinquencies. To encourage compliance with the timely payment of withheld income, employment and social security taxes, the IRS has created a unique and potentially devastating penalty called the Trust Fund Recovery Penalty.  This penalty can be assessed against any person responsible for remitting payroll tax payments and can be assessed whether or not the business continues to operate. Since the IRS defines a responsible person as any person or group of people who have the power to direct, collect, account for or pay trust fund taxes, that person may fit any one of the following descriptions:

  • A corporate director or shareholder
  • An employee or officer of the business or corporation
  • A partnership member or employee
  • A board member of a non-profit organization
  • Any other person with control or authority over the payment of the taxes

In addition to the steep Trust Fund Recovery Penalties, the collection process for payroll tax debt is accelerated and settlement agreements are much more difficult to obtain.

Due to the combined effect of the factors discussed in the previous paragraph, a payroll tax debt can potentially result in the downfall of an otherwise successful business. In light of this risk, our firm always advises financially troubled business owners to make every effort to comply with all payroll tax filing deadlines and to pay the related taxes in a timely fashion.  If a payroll tax debt already exists, we encourage prompt action as the best way to get control of the situation and obtain tax relief. Tax debts arising from unpaid payroll taxes can be very significant since they include the assessment of a substantial Trust Fund Recovery Penalty in addition to the standard failure to file penalties, late payment penalties and interest assessed on the unpaid balance.  Obviously the larger the tax debt, the more difficult it can be for a smaller company to recover and find tax relief.

If you are a business with a payroll tax debt, we can help you evaluate the available tax settlement options and resolve your payroll tax debt problem. Because we know the collection laws and have experience negotiating with the IRS, we are in a better position than an individual taxpayer to stop enforced collection activity and to arrive at a reasonable tax settlement with the IRS. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. With over 16 years of experience, we will negotiate with the IRS on your behalf. Contact us by phone at (949)-596-4143 or by email at info@protaxres.com to receive a free, no obligation consultation.

 

Policy Change for Tax Settlements Involving Innocent Spouse Relief

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The Internal Revenue Service has changed their policy regarding those tax settlements dealing with a request for Innocent Spouse Relief. Originally there was a two year limit on the innocent spouse relief, but effective Monday, July 25, 2011, that has been eliminated.

The IRS initiated a review of the equitable relief provisions of the innocent spouse program earlier this year, and decided to make changes in both the policy and the program. Those changes will become fully operational this fall and additional guidance will be issued, according to the IRS. The IRS said it would no longer apply the two-year limit to new equitable relief requests or requests currently being considered by the agency, as of Monday, July 25, with respect to expanding the availability of equitable relief.

If the collection statute of limitations for the tax years involved has not expired, a taxpayer whose equitable relief request was previously denied solely due to the two-year limit may reapply using IRS Form 8857, Request for Innocent Spouse Relief.

The new rule will automatically be applied to taxpayers with cases currently in suspense and should not reapply. The two-year limit in any pending litigation involving equitable relief will not be applied, according to the IRS. The IRS said it would suspend its collection action under certain circumstances where the litigation is final.

If you need help with tax debt, talk to one of our licensed experts today!

States Offer Short Sale Assistance to Taxpayers

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When assisting clients with complicated tax settlements, taxpayers often find that the IRS and States have filed tax liens to protect their interests in back taxes owed. Tax liens can cause numerous problems, including damage to credit reports and also make the sale of property more difficult.

Many people, who are facing financial difficulties, are trying to sell their distressed homes for less than the loan balance in short sales. Often, during these transactions, there may not be enough value to pay the recorded state tax lien in full. This may delay, or even prevent, the sale of the home. (inboundrem.com) The State of California is one of many states that may be able to assist the taxpayer with a partial release of a tax lien.

A partial release of lien releases a specific piece of property from a recorded state tax lien, but does not release the lien in its entirety. The lien remains in effect against the taxpayer and continues to encumber other property the taxpayer owns or acquires in the future. The State of California estimates it can take up to 21 working days due to processing increased requests.

Clients seeking a resolution to complicated and large tax debts often face a variety of obstacles. The IRS and States, in recognition of the need to assist taxpayers, have begun to assist taxpayers in resolving these issues.  Complicated tax settlements require a tax professional that is aware of the various tax settlement options available from tax agencies.  Professional Tax Resolution can assist taxpayers in resolving even the most complicated tax settlements.

IRS Violates Taxpayers’ Tax Lien Rights Regarding Tax Debt

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Do you have unfiled taxes, or unpaid tax debt? If so, there’s a chance the IRS has, or will file a tax lien or wage garnishment for any uncollected tax debt. However, there are legal requirements the IRS must follow before doing so.

According to a new government report, nearly 33,000 taxpayers have been harmed due to the IRS not following legal requirements to notify them and their representatives of their rights related to tax liens in a timely manner.

The report was written by the Treasury Inspector General for Tax Administration. The TIGTA recommended that IRS officials ensure tax lien procedures are properly enforced and consistent with IRS procedures. Even though the IRS agreed with this recommendation, it doesn’t mean mistakes can’t still occur. If you are struggling with a tax lien or tax debt contact one of the licensed experts at Professional Tax Resolution to discover your options for tax settlements.

He Owed the IRS $80,000 in Back Taxes. We Reduced His Tax Debt to Zero!

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Steve H. came to Professional Tax Resolution after receiving notice of a wage garnishment from his largest customer.  Steve, a technology consultant, had failed to file tax returns for six years and, according to IRS calculations, owed over $80,000 in back taxes, penalties and interest.  Tax settlement plans for taxpayers with numerous un-filed tax returns always begin with gathering the records necessary to prepare the un-filed tax returns. In this case, the taxpayer was able to gather some information from banking records and some from customers for which he had provided services. Fortunately for this taxpayer, his wife had worked for several years and had had federal and state taxes deducted from her paycheck. We were able to obtain and verify additional tax information by obtaining IRS wage and income transcripts.

After gathering all possible relevant information, we were able to prepare all of the outstanding tax returns.  While balances were due in some years, refunds were owed in others. We were able to request that the IRS apply refunds owed to years where balances were due such that the net result was an outstanding tax liability of zero. It is never advisable to wait for a wage garnishment, tax lien or tax levy to resolve an outstanding tax issue. However, even when a tax issue seems practically unsolvable, there are tax resolution options available.  Professional Tax Resolution always looks at all available tax settlement options and provides a tax debt resolution plan for even the most complicated cases.