Payroll tax problems can close a business overnight and lead to criminal sanctions including prison time. As the IRS grows increasingly aggressive in their collection attempts for past due payroll taxes, struggling business owners with delinquent payroll taxes need to know how to protect the future of their businesses. Don’t let the IRS levy your funds and take control of your cash flow – find out how you can resolve payroll tax penalties and avoid the long-term devastation they can cause your company.

These days are tough on businesses, and delinquent payroll taxes can be the downfall of many otherwise successful companies. Payroll tax problems can cause long-term devastation that your business may never recover from. In this down economy, many businesses may find themselves in a cash flow crisis and tempted to “borrow” from the money they collect from employment taxes to pay operating expenses until things improve. This is a big mistake because what many businesses don’t know is that the IRS views non-payment of payroll taxes as ‘theft’ and thus it carries severe consequences.

The IRS has highly effective methods to ensure that they collect on delinquent payroll taxes, including exceedingly severe measures that can put you out of business. The IRS is merciless and the biggest risk that business owners with payroll tax problems can take is incurring their wrath. They have a powerful arsenal of tools at their disposal to collect on delinquent payroll taxes and will stop at nothing – including levying your customers/clients. If you are in a situation where you have not been compliant with payroll taxes for a prolonged time, you will be required to provide to the IRS any information they request, including a list of clients and customers (phone numbers and addresses). At this point, the IRS will intercept payments from your customers to pay your delinquent payroll taxes.

In addition to having your cash flow cut off, you will also risk permanently losing valued customers because of your payroll tax problems. After being contacted by the IRS, your clients may no longer want to do business with you and you may lose an ongoing source of revenue to keep your operations afloat. So don’t let the IRS take control of your cash flow and risk losing the company you spent so many years building.

Additionally, ignoring potential payroll tax penalties is one of the biggest mistakes that small businesses can make. The stakes are huge – along with being hit with hefty delinquent payroll tax penalties, many business owners with delinquent payroll taxes have found their business’s doors padlocked overnight and facing criminal sanctions including prison time. And with the federal government looking for ways to fund deficit-reduction activities as well as close the growing tax gap, the IRS is taking a closer look at employment tax returns, and stepping up increasingly aggressive efforts to collect unpaid payroll taxes.

To protect the future of your business, avoid the common mistakes that many business owners make when faced with payroll tax problems and learn how to resolve delinquent payroll tax penalties and avoid the long-term devastation to your company.

If you owe delinquent payroll taxes, before you talk to the IRS, talk to a tax attorney/ tax resolution specialist. When it comes to delinquent payroll tax penalties, the IRS does not really care if your business survives. When the IRS goes after your business for delinquent payroll taxes, you risk handing over the reins of your business to the IRS. To avoid this, you will need to get professional help from a tax attorney or tax resolution specialist who can help you protect your company. In addition to resolving your payroll tax problems, a qualified professional will be able to negotiate on your behalf with the IRS, as well as guide you on how to best move forward with your financial situation so you can keep your business.

An experienced professional will truly understand what makes your businesses tick and will make sure that you have the cash flow and ongoing business necessary to keep your doors open. With no other sources of working capital, your company will go out of business when you can’t pay rent, utilities, and other operating expenses – it would be just a matter of time.

Payroll tax debt should not be taken lightly – IRS levies on wages and bank accounts can cause you to lose your business! Payroll tax problems can be the “kiss of death” for many business owners. IRS penalties from delinquent payroll taxes can add up to about 33% PLUS interest in just 16 days after you have filed the 941 (payroll tax return) past the due date and didn’t pay! You can imagine what those delinquent payroll tax penalties add up to if you ignore this for a prolonged period of time. This can seriously paralyze your cash flow and you risk losing your business, having your assets seized and being held personally liable!

When it comes to delinquent payroll tax penalties, the IRS collection Revenue Officer has unyielding power and authority. They have the power to padlock your front doors, putting you out of business, without obtaining a court order. No other creditor in the world, (not even the President of the United States) can do this. They can seize your machinery and equipment. They can contact your customers, and if your customers owe you any money, the IRS will intercept these funds through their powerful levying authority.

So you will need to get expert help from a tax attorney or tax resolution professional who specializes in delinquent payroll taxes who can ensure you have working capital to save your business while you resolve your payroll tax problems.

Don’t waste any time – Delinquent payroll tax penalties are a ticking time bomb. If you know you owe delinquent payroll tax penalties, contact a tax attorney or tax resolution specialist and start your action plan today. The penalties assessed on delinquent payroll tax deposits or filings can increase dramatically the total amount owed in just a matter of months. Generally, if you don’t take immediate action to deal with a delinquent payroll tax penalties, you will find yourself out of business.

Because the IRS, is very aggressive collecting delinquent payroll taxes, you need to come up with a way to pay them off fast. The IRS can levy a Trust Fund Recovery Penalty (TFRP) that imposes a 100% penalty on responsible third parties for delinquent payroll tax penalties. This is considered a civil penalty that only applies to collected taxes (like Social Security) and withholdings and does not apply to the employer’s portion of FICA, Medicare, 940 taxes or income taxes of the corporation.

Know that the IRS prioritizes collecting employment taxes and accelerates the notice process – so act swiftly to save your company. There’s a lot more at stake for business owners dealing with delinquent payroll tax penalties than cutting a deal with the IRS to save money – resolving your delinquent payroll tax penalties is about saving your company.

The IRS assigns a higher priority to collecting delinquent payroll taxes than income taxes so it’s much more difficult to negotiate a tax settlement such as a long-term installment agreement for unpaid payroll taxes.

  • Offer in Compromise settlements for delinquent payroll tax penalties are often rejected because the IRS may assume that the business is worth more than delinquent payroll tax debt owed, and they use that as reason to reject the offer.
  • To prevail in these Offers for delinquent payroll tax debt, the taxpayer needs representation by an expert who can analyze and effectively articulate the real value of the business, which includes taking into consideration seasonality of the business, as well as macro factors in the economy.
  • For larger delinquent payroll tax penalty liabilities, the taxpayer will be required to submit a full set of financials for the business as well as for themselves, each proposal for an installment agreement is negotiated point by point.

Don’t risk being held personally liable from delinquent payroll tax penalties. There are two tests that the IRS uses to determine the responsible party for payroll tax issues:  If the IRS can prove that you were willful and intentionally (very low thresholds) didn’t file and/or pay your employment taxes, it may be considered a federal crime.

One or more persons may be assessed with the delinquent payroll tax penalties from the IRS for delinquent payroll taxes –  they can be assessed jointly and incur several liabilities. You do not have to be an officer of the company to be liable.

The IRS is the most aggressive collection agency with the ability to pierce the corporate veil and go after the owners/shareholders/members individually. Liability for delinquent payroll tax penalties can be assessed against CPAs, EAs, accountants, and bookkeepers.

Don’t give up hope. If you’re already in trouble with the IRS for delinquent payroll tax penalties, what do you do next? Don’t panic. Just keep in mind that there’s a solution to every delinquent payroll tax problem. Whether you owe $700 or $7 million in delinquent payroll tax penalties, you can find a way out, sometimes for a small fraction of what you owe. The key is contacting a tax resolution professional as soon as you can. A consultation with a good tax attorney or tax resolution specialist can turn your delinquent payroll tax nightmare into a distant memory so you can go back to the business of your small business, creating the American dream.

For more information on achieving a tax resolution for your payroll tax problems, visit for a free tax relief consultation or call 866-IRS-PROBLEMS.

Michael Rozbruch is one of the nation’s leading tax experts. A Certified Tax Resolution Specialist (CTRS), licensed CPA and the founder of Tax Resolution Services. He helps individuals and small businesses solve their IRS problems and is dedicated to educating the public on tax planning and other strategies for managing their personal and business finances.

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