Unpaid Payroll Taxes
Unpaid payroll taxes can be a big problem for business owners who are responsible for withholding and depositing payroll taxes. Payroll taxes include employee income taxes, social security taxes, unemployment taxes, and state and local income taxes. The IRS monitors these taxes closely because these taxes are withheld and deposited on the employees' behalf. Failure to collect these taxes from employers generally results in great difficulty collecting the taxes from anyone. The IRS uses strong enforcement tactics to collect from the business owner and managers responsible for depositing these taxes with the U.S. Treasury.
Failure by the managers or executives of the business to withhold and pay the taxes can result in additional penalties and even criminal liability for a willful failure. The IRS also has the ability to assess a Trust Fund Recovery Penalty (TFRP) against persons it deems responsible for the failure to withhold taxes. The TFRP is a very powerful tool because it is very difficult for taxpayers to avoid and once assessed cannot be eliminated, even in bankruptcy, without negotiating with the IRS. The TFRP is equal to the tax that should have been deposited with the IRS, essentially swapping the unpaid employment taxes for a penalty tax equivalent that cannot be reduced without negotiating with the IRS. Taxpayers who receive an assessment letter from the IRS should contact Tax Attorney Andrew Steiger at Steiger Tax Law to discuss tax relief or payment options for unpaid payroll taxes and help navigate the process to avoid an IRS criminal investigation.