Payroll Tax Debt in Greenwich, CT: What Happens When the Business Can't Pay the IRS the Payroll Taxes - Part I.

The focus of our practice is assisting taxpayers with complex financial issues, including bankruptcy & financial restructuring and civil and criminal taxpayer representation, and we see many business owners in Greenwich, Connecticut and elsewhere dealing with outstanding payroll tax liabilities.  The fallout of unpaid payroll taxes can be devastating for both business and the owners/operators. 

The worst thing a business owner can do is to fail to file the payroll tax returns.  Unfortunately this is exactly what most business owners do.  You can understand the rationale: “If the IRS doesn’t know they will not come after me…yet.”

The penalties for payroll taxes are significant, and adding an additional failure to file penalty on top of everything else just makes the hole that much deeper.

What happens is the IRS will assess the business for the unpaid payroll taxes and then seek interviews with all the individuals they think may be responsible for the unpaid payroll taxes.  How do they do this?  The IRS will obtain (either by asking or via administrative summons) copies of bank statements, the bank account signature cards and identify the business owners and officers.

Once the IRS identifies who they believe may be responsible for the businesses failure to file/pay the payroll taxes, the IRS will propose an assessment against each individual.  This assessment is called the “Trust Fund Recovery Penalty” because it is for the portion of the payroll taxes withheld from the employee’s pay that the employer was holding in trust for the government. 

The taxpayer’s targeted may either sign a waiver (Form 2751) agreeing that they are responsible, or file a written protest appealing it within 60 days.

There are some significant issues to be dealt with:

·      Is the company viable?  If the company is a viable business but just ran into a temporary cash crunch then we can sort out the issue, get into a plan with the IRS and move on.  If the decision is that the company is not viable, then the company should be shut down and a plan to resolve the outstanding tax issue for the individuals decided upon.

·      The individuals deemed responsible will each need to deal with the IRS Collection Division.  They will need to be represented and a plan sorted out, as unfortunately the IRS will seek to collect from both the business and the individuals.

In Part 2 of this series I will review the individual assessment and strategies for taxpayers to handle this issue. 

If you have any questions about Payroll Tax Issues or criminal tax issues in Greenwich, Connecticut or elsewhere please feel free to contact me at (203) 285-8545 or by email at egreen@gs-lawfirm.com.

Eric L. Green

Green, & Sklarz, LLC

243 Tresser Boulevard, 17th Floor

Stamford, CT 06901

Ph. (203) 285-8545 x 102

Fax (203) 286-1311

egreen@gs-lawfirm.com

www.gs-lawfirm.com

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