In this article, you can discover:
- How closely the IRS monitors payroll taxes owed by businesses
- The serious consequences for failing to make payroll taxes to the federal government
- The ten-year collection period and aggressive tactics the IRS may use to collect unpaid taxes.
How Closely Does The IRS Monitor Payroll Taxes Owed By Businesses?
The IRS closely monitors payroll taxes owed by businesses. It is important to note that payroll taxes have two components: the employer’s responsibility and the employee’s responsibility.
The employee portion is frequently where businesses face problems, as they act as government agents collecting and forwarding taxes to the IRS. Failure to do so can result in a trust fund recovery situation, where those in charge of the company can become personally liable for the unpaid taxes.
This means that the owners and any officers involved in the business can be held responsible for this debt, as it is not a company problem but rather a personal liability issue.
How Serious Is It For A Business To Fail To Make Those Payroll Taxes To The Federal Government?
Failing to make payroll taxes to the federal government is just as serious as failing to pay income taxes. Small businesses, if structured correctly, may not pay income taxes, but it is still essential to ensure that payroll taxes are paid, collected, and filed correctly.
The business needs to take responsibility for paying these taxes to avoid any potential legal and financial difficulties. Consequences for failing to do so include notices and liens from the IRS and the potential for personal liability for those involved in the company, such as the owners and officers.
How Long Does The IRS Have To Go Back And Collect Payroll Taxes?
The IRS has a ten-year collection period during which they can collect on unpaid taxes. This includes a three-year assessment period where they can issue the tax and a ten-year collection period where they can take action to collect the tax, such as garnishing wages or filing liens.
If the tax debt is not addressed within this time frame, it can result in additional legal and financial consequences for those who were responsible for the business, including personal liability for the unpaid taxes. It is important to address and resolve unpaid taxes as soon as possible to avoid these potential issues.
Once The IRS Comes Across Unpaid Payroll Taxes Owed By A Business, What Steps Do They Generally Take To Collect?
Once the IRS becomes aware of unpaid payroll taxes owed by a business, they generally take the following steps to collect:
- They will issue a notice of assessment, notifying the business of the taxes owed and the requirement to file a return.
- If the business fails to file a return or file it timely, the IRS may file a return on its behalf, based on its information, which can result in a higher tax bill.
- After the notice is issued, the business will have a period to make payment before additional notices are sent.
- If the business fails to make payment, it may be put into collections and may receive notices of intent to file liens on their or the business’s assets.
- In the case of payroll taxes, a trust fund recovery may be established, giving the IRS the ability to go after the responsible parties of the business personally, issuing notices of collection activities and liens on those individuals as well. The process is similar to other taxes, but the collection effort is extended to include the personal assets of responsible parties.