Jul 24, 2008

Payroll taxes....The wrong question....

I am often perplexed by business tax liability questions and clients who want to get a "free lunch"- i.e. get out of paying the liability. They often are looking for an Offer in Compromise and stay in business or for a partial pay installment agreement. In both instances, it means the IRS is getting less then full payment of the tax liability- i.e. the taxpayer is getting a free lunch.

First, if this is payroll tax liablity, i.e. unpaid trust fund taxes, then public policy prohibits the IRS from putting a business at a competitive advantage v. other businesses, i.e. allowing them lower costs by not paying taxes. Second, the IRS incurs a double loss in the loss of trust fund taxes coupled with the refunds they are paying taxpayers who get refunds on the federal income tax withheld that is not paid to the government.

Opportunistic questions of the free lunch and other unrealistic requests- i.e. not filing a federal tax lien, is quite simply the wrong question to ask. If your business has payroll tax liabilities, you will be assigned a Revenue Officer, the highest level of the IRS Collection food chain. This person will do an effective, thorough financial investigation. If your business will not be able to pay the taxes, guess what? The IRS will assess the trust fund portion of the taxes against the responsible individuals and collect on them to the fullest extent allowed by law.

Hence, what are the right questions:

1. Can I keep my business open?
2. Can the business resolve the unpaid liabilities so that the individuals will not have to satisfy the obligations of the business?

The answers to the above better be "yes" or the IRS will exhaust all efforts to collect. And, because it is assigned to a Revenue Officer, the IRS will collect to the extent that there is funds available by the business and the responsible individuals.

If you can look into the mirror and ask the right questions and have the right answer, then you are on your way to resolving your problem. Clients, who are looking for a free lunch, will ultimately be disappointed, as the IRS will collect from the individuals involved. If you are asking the right questions and the answer is yes, I can work with you and resolve your problem with a realistic. livable solution.

2 responses:

Anonymous,  September 1, 2008 at 10:54 AM  

What's amazing is that most business owners discard this as "stealing"

Anonymous,  September 1, 2008 at 11:00 AM  

What's amazing is that business owners discard this as "stealing"

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