940/941 Payroll Taxes
If a business has employees but has failed to file payroll returns or failed to turn over amounts withheld from employee's wages (income taxes, social security taxes, and Medicare taxes), this is considered the same as "stealing" the government's money. As the government must still credit these funds (as if received) to your employee's income tax withholding, social security and Medicare contributions, this is widely considered the worst type of tax debt to owe. The amounts being withheld from your employee's wages are considered as being held in trust to the United States. These funds are commonly referred to as trust fund taxes. These funds belong to the United States Government.
If you owe this type of tax debt, the IRS and/or State agencies can and will legally levy account receivables (income sources), bank accounts, seize business assets such as real estate, vehicles, equipment, tools, anything they can get their hands on to pay the past due tax debt. In fact, they can and will close your business down.
It is a common mistake for employers to think they are protected under their corporate veil. No officer of a corporation is personally protected if the corporation has unresolved payroll tax issues. Corporations can protect you from most liabilities, but never payroll taxes.
The IRS will likely assign a Revenue Officer in your area to actively and aggressively try to collect the payroll tax. Revenue Officers will visit your place of business during operating hours (often without business owners noticing) to monitor and assess income potential and take a list of your assets/inventory that they intend to seize, in addition to issuing levies as state above.
If payroll taxes are not paid over to the IRS, a personal liability will be assessed against officers, shareholders, directors, or anyone else deemed as being a responsible party to the debt. The liability imposed is referred to as "Trust Fund Recovery Penalties" and is equal to the unpaid withholding taxes.
If you have an outstanding payroll tax issue, it is critical to seek professional assistance to ensure your rights are protected as you seek to find a reasonable resolution to your payroll liabilities.
Our staff has extensive experience in dealing with businesses with payroll tax issues, as well as establishing a working relationship with even the toughest of Revenue Officers.
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