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  • Note from the IRS: Don't mess with payroll taxes
  • Coming soon: The IRS will do your taxes for you
  • The U.S. Department of Labor (DOL) is back in the enforcement business.



    • Note from the IRS: Don't mess with payroll taxes

    It’s tough to get out of paying payroll taxes.  When you withhold tax money from employees but fail to give it to the IRS, they will come after you.  Quite rightly, the IRS views it as government money, a trust fund belonging to the IRS.

    In a cash-strapped business, keeping the lights on or the warehouse stocked can seem more important.  It may be tempting to think you can always pay the IRS later.  But these problems have a way of snowballing, so it’s best to keep payroll taxes current at all times.  Shameless plug warning - consider using a payroll service that directly pays the money over to the IRS.

    And just how does the IRS makes sure they get payroll taxes?

    Business owners and other “responsible persons” have personal liability for these taxes and excuses are rarely accepted. In one case, the IRS refused to take sympathy on a company owner who claimed he was duped by his bookkeeper.   You can be liable even if have no knowledge the IRS is not being paid. 

    As if that is not bad enough, The IRS can assess a Trust Fund Recovery Assessment—also known as a 100-percent penalty—against every “responsible person.”   In determining “willfulness,” courts focus on whether you had knowledge of the non-payment of taxes or showed reckless disregard whether they were being paid.  But a person need not actually perform the withholding and payment functions to be considered “responsible.”

    If you have signature authority but don’t exercise it, that can be enough to result in liability.  Factual nuances matter, so one person may get stuck while another gets off scot-free.  The IRS often makes an assessment against every officer, watching them turn on each other.

    Ken Rogers | 09/29/2011