Unpaid Payroll Taxes

Unpaid Payroll Taxes

Did you know that small businesses are a significant target for the IRS? They recognize small businesses as their largest source of uncollected revenue, largely due to unpaid payroll taxes, also known as employment taxes. In fact, tax laws allow them to padlock the doors of the business, confiscate assets – including incoming payments and other revenue, and establish contact with the company’s clients.
In additional efforts to collect back taxes, the IRS has the legal right to collect the amount due from the personal accounts of some employees, corporate officers, and company shareholders. Employment taxes consist of social security, railroad retirement and collected excise taxes, and are withheld from employee’s paychecks. These withholding are deposited into a trust fund until the business makes their combined tax payments.

Trust Fund Recovery Penalty (TFRP)

If the business can’t pay the payroll taxes, two monetary penalties are assessed: one on the amount of the unpaid balance of the payroll taxes and the other on the employee’s portion of the withheld FICA taxes and are equal to the unpaid employee taxes withheld. These penalties are collectible from individual taxpayers with certain roles within the business; this is called the Trust Fund Recovery Penalty (TFRP.)

The TFRP allows collection on the debt from an employee, shareholder, or a member of the board of trustees if the business is a nonprofit organization, an individual responsible for the company’s disbursement of funds, payroll service provider or one of its employees, or a professional employment organization or one of its employees.

If the IRS finds that any of these individuals were willingly neglectful of making the payments or were aware of the requirements of the law but ignored them, they will be deemed as an appropriate party to hold personally responsible for the unpaid payroll taxes. No intent of malice needs to be present for the IRS to assess the TFRP in these cases.

Unpaid Payroll Tax Penalty

The IRS takes unpaid taxes very seriously. Therefore, the penalty for back payroll taxes is 100 percent, which is equal to the balance owed for employee taxes at the deadline. If a company owes $25,000 in unpaid payroll taxes, the penalty is $25,000.

An individual officer of the company isn’t always responsible for the full amount of the debt owed. Commonly, every individual taxpayer deemed responsible for the debt will be required to pay an equal portion of the balance due, including penalties and interest.

What To Expect if You're Responsible for Unpaid Payroll Taxes

If the IRS determines that you’re responsible for the unpaid payroll taxes of a company, a letter will be generated notifying you that you’ve been recognized as a responsible party and that the TFRP is being imposed on you. Responsible parties are determined by an internal investigation of the company’s standard financial practices. They examine company contract signatures, bank signature cards and more to gain comprehensive insight on who are appropriate parties for the TFRP.

The IRS allows a repeal to this determination if a response to the letter is received within 60 days, or 75 days if the letter is being sent to you in another country.

The IRS has the right to assert collection efforts on personal assets that aren’t related to the business, which can include a lien on personal property or a levy on personal bank accounts. Aggressive collection efforts will commence on an individual taxpayer if the IRS is unable to collect his or her share of the unpaid payroll taxes by the deadline expressed in the TFRP notice.

How to Protect Yourself From Aggressive Unpaid Payroll Tax Collection Efforts

An IRS disruption of this magnitude is difficult for many small businesses and individual taxpayers, alike to survive. At Tax Champions, our licensed and experienced tax professionals are adept at navigating the options available to resolving payroll tax debt for the least amount possible. We strive to maximize our 35 years of experience by matching our clients to the most effective program available to them through the IRS.

Our hope is that you sleep better at night knowing that further collection efforts have been abandoned during our negotiations. Give us a call today for a free consultation with no high-pressure sales pitch or obligation to hire our firm. Our knowledgeable tax professionals will confidentially discuss the circumstances of your matter to determine your best options.

If you decide that our firm is a good match for your needs, we’ll happily get started right away. Our staff is available seven days a week during the day and evening hours for your convenience. Reach us at 888.518.8964 or submit your contact information to us in the blue box on the right side of this page and we’ll reach out to you.

If you’re responsible for unpaid payroll taxes, we’ll negotiate the lowest terms that you qualify for with the IRS and help to establish an affordable installment agreement, if necessary, to bring your taxpayer account back into compliance with the federal tax code and the IRS. Call now.




[1] Employment Taxes and the Trust Fund Recovery Penalty TFRP. (2019, March 2). Retrieved from //www.irs.gov/businesses/small-businesses-self-employed/employment-taxes-and-the-trust-fund-recovery-penalty-tfrp

Copyright Tax Champions 2017