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Salt Lake City Utah Tax Attorney Jim Gilland 801-444-9302

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Payroll Taxes Are Very Different Than All Other Types Of IRS Problems.

The IRS Will Act Fast For Unpaid Payroll Taxes

With some tax problems - like not paying or even not filing personal income taxes - it can take the IRS a while (even years) to “catch on”.  And even when they do finally realize there’s a problem, they may not react so quickly.

That is not the case with payroll taxes. If payroll taxes are not paid, the IRS is all over it. They’ll come down on the business and potential responsible persons extremely fast and when they do, they are often particularly nasty about it.

The IRS would rather shut down your business and liquidate your assets than give you the opportunity to not pay even more payroll taxes.

More on this later.  Here’s why you must act quickly.  Owing the IRS isn’t like owing a credit card company or a bank. They have special powers granted to them by the U.S. Government to literally reach into your bank account and take your money. The same with real estate, social security benefits, 401(k)’s, IRA’s, cars, boats, houses, accounts receivable, cash loan value of your life insurance...even commissions owed to you by others, all just to satisfy a tax debt. And in the case of tax evasion or fraud, they can even put you in jail.

Let me emphasize – there’s a MAJOR difference between not paying personal taxes and not paying payroll taxes:

  • The IRS can chain and padlock the front doors of your business without a court order
  • Payroll taxes CANNOT be discharged in bankruptcy
  • Owners, partners, corporate officers are held PERSONALLY liable for unpaid payroll taxes
  • The IRS can seize your PERSONAL assets to satisfy a payroll tax debt.
  • Not paying your payroll taxes could be considered a Federal Crime if the IRS proves you willfully didn’t file or didn’t pay.

As a potential target, you need to consider whether The IRS would consider you “responsible.”  Have you ever signed a payroll check? If so, chances are good you’re on the hook. However it may not be clear. The IRS has a two pronged test to determine if you are a “responsible person”:

(1) Whether the party against whom the Trust Fund Recovery Penalty is proposed had the duty to account for, collect, and pay over payroll taxes; and
(2) Whether he or she willfully failed to perform this duty.

Pretty vague, huh?  That is why the IRS has their work cut out for them when trying to determine who is “responsible” for not paying payroll taxes. There’s often no “cut and dry” answer.  In some cases, even the company’s CPA has been held liable.

An often asked question is “Why does the IRS take payroll tax issues so Seriously?” 

The IRS looks at employers who don’t pay their employees’ payroll taxes as stealing, plain and simple.

Payroll Taxes are referred to as Trust Fund Taxes, because in essence you have been “entrusted” with money belonging to your employees. It’s your job to withhold a portion of money they’ve earned to pay their income tax and their share of FICA (social security and Medicare) and pay it to the U.S. Treasury.

Your employees are the ones who owe the money to the government - you are simply the delivery person. So, when you don’t pay your employees’ payroll taxes, it’s considered theft. In the eyes of the IRS, the money was never yours in the first place.

So, why is the IRS intent on closing the business.  Well, the way the IRS sees it, your Payroll Tax problems are likely to get bigger not smaller - as long as your business is allowed to remain open.  Forcing you to close your business instantly stops this possibility.

So, please understand – when the IRS discovers you have a payroll problem, they are usually pre-determined to shut your business down, and quickly.  It is simply easier for them to shut the business down, and deal with the issues of getting their money from the “responsible parties.”

Additionally, if the IRS Revenue Officer were to agree to a payment plan, and the debt gets worse, its an even more embarrassing situation for the Revenue Officer, since he was “duped” into agreeing to a plan. Again, it’s easier just to shut the business down.

You Need A Lawyer To Work For Your Behalf With Payroll Trust Fund Penalties

Therefore - if you want to keep your business open, you need a professional third party speaking on your behalf, basically convincing the Revenue Officer that it is in the best interest of the government for your business to stay alive than be killed...and that they are more likely to get the money if they work with you. It’s a tough sell – so if you find yourself in this situation, it is critical you call and allow me to speak on your behalf to the IRS, or you may say something they will hold against you.

Don't "Borrow" From The Payroll Trust Fund - You Can't Afford The Interest Rates!

It’s not difficult to get into payroll tax trouble.  Few business owners intentionally attempt to defraud the government out of payroll taxes, most problems stem from simply having “too much month left at the end of the money”.  Then, the decision is made to put off paying the payroll tax into the IRS, essentially making a short term loan from the IRS.  Here’s why this is possibly the worst loan ever, outside of the ton of reasons  I’ve already outlined. 

The penalties! You could be hit with three major penalties:

  • failure to file
  • failure to deposit,
  • failure to pay

The above three, can add up to a fortune in just the first 16 days after you have filed the Payroll Tax Return past the due date.

 Call Gilland Law at 801-444-9302 today. Time is of the essence.




Attorney Jim Gilland Is Experienced, Trustworthy and Authorized to Represent Clients In Court of Law If Needed
Utah State Bar
Member Since 06/14/1996
Member Utah Bar Association - Tax Attorney Jim Gilland
Gilland Law Firm, PC, Attorneys & Lawyers, Clearfield, UT
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Authorized To Represent Clients In US Tax Court
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For The 10th Circuit
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