Payroll Tax and TFRP

Payroll taxes refer to income taxes withheld from employees’ income, including Social Security and Medicare taxes. All employers are legally required to withhold payroll taxes from the paychecks of their employees and remit the withheld funds to the IRS. When employers, knowingly or unknowingly, fail to withhold payroll taxes, or fail to remit the funds to the IRS, they acquire a payroll tax debt.

Payroll tax is considered a trust tax where it is the responsibility of employers to pay taxes on behalf of their employees to the IRS. The “trust” comes in where the employee’s federal tax withholdings and the employee’s portion of FICA are withheld and held in trust to be delivered to the IRS in the form of Federal Tax Deposits. Therefore, failure to pay payroll tax is considered serious, and the IRS is aggressive when it comes to collecting on delinquent payroll taxes.

To satisfy your tax debt, the IRS has absolutely no reservations dismantling the business you have worked so hard to build and even pursuing you personally. Interest and penalties are growing daily, it is very important that you engage professional help and resolve your payroll tax debt as soon as possible. The purpose of the trust fund recover penalty (TFRP) is to collect taxes from persons who are not directly liable for the tax but had the responsibility over the tax payment function. For the TFRP to apply, the person first must be responsible for collecting, truthfully accounting for, and paying over a tax to the government. Second, that person must willfully fail to do so, or willfully attempt in any manner to evade or defeat the tax or its payment. Both requirements must exist simultaneously for a person to be liable.

Some factors in determining whether a person is responsible for the TFRP.  The individual:

(a) is an officer or member of the board of directors;

(b) owns shares or possesses an entrepreneurial stake in the company;

(c) is active in the management of day-to-day affairs of the company;

(d) has the ability to hire and fire employees;

(e) makes decisions regarding which, when, and in what order outstanding debts or taxes will be paid;

(f) exercises control over daily bank accounts and disbursement records; and

(g) has check-signing authority.

The effects of delinquent payroll taxes are very serious. If left unresolved, unpaid payroll taxes can cause you to lose your business and if responsible, the IRS can pursue company owners, officers, and specific employees if necessary to satisfy the delinquent taxes, as well as assess civil penalties to parties involved with the businesses finances.

Call us today for a free consultation.  We have the experience and the strategies so you don’t pay a penny more than you should!