Business owners who fail to remit employee payroll withholding taxes (Form 941’s) are putting their companies in a position to be shut down by the IRS over payroll issues. The IRS actively collects on this type of tax far more aggressively than any other tax obligation.
The IRS believes that, as an employer, you have a fiduciary responsibility to collect income tax withholdings from your employees and remit them to the IRS on a quarterly basis. By your withholdings and remittances, your employees are also aided in meeting their own tax obligations. In essence, the IRS considers unremitted payroll taxes as theft from both your employees and the U.S. Treasury.
The Civil Trust Fund Recovery Penalty enables the IRS to focus its collection efforts against a member, deemed responsible for a delinquency, of a tax-owing company. The law that established this penalty also enables the IRS to pierce the corporate veil of a company and enforce collections against officers of the business individually. In fact, IRS collection activity can also be directed against non-officers, such as people who have signing authority on the company bank account.
Essentially, a “responsible party” is someone who makes or shares in the decision to use employee withholding taxes to pay bills other than payroll taxes owed to the IRS.
Negotiating a settlement for payroll tax issues can be a very complicated and drawn out process because of the gravity of the offense of not remitting payroll taxes. Furthermore, if an employer remits quarterly payroll taxes sporadically, the IRS will take that remittance and apply it to the oldest quarter/liability. This can lead to other under-withholding issues.
Lack of reporting and untimely remittance of 941 deposits typically will generate large civil trust fund penalties. The professionals at Tax Help MD specialize in resolving Form 941 IRS Payroll Tax problems. We may be able to obtain a reasonable settlement involving payroll tax help with the IRS before they institute proceedings against the partners/officers of the company individually.