Payroll Tax Problems. Advanced Guide Anthony E. Parent, Esq. Michelle D. Wynn, Esq. Parent, Parent & Wynn LLP. January 9, 2015

Transcription

1 Payroll Tax Problems Advanced Guide Anthony E. Parent, Esq. Michelle D. Wynn, Esq. Parent, Parent & Wynn LLP January 9, 2015

2 What we are going to cover How they happen. What Payroll taxes are Why they are hard to solve. How to get the best resolution.

3 How they happen 1. Employee/Corporate embezzlement 2. Cash-flow (taking a loan from Uncle Sam)

4 What are payroll taxes? Uncle Sam doesn t trust taxpayers to self-withhold. Right? Most of our tax resolution clients are self-employed right? That why in WWII the IRS made employers responsible for withholding taxes. These are called Trust Fund taxes and these are the taxes the employers holds in trust for the IRS and makes the payment to the IRS for them. Federal Income Taxes Medicare (1/2) Social Security (1/2)

5 But there s more in the package Do you know your employer pays other taxes for the privilege of employing you? These are are called employment taxes. 1/2 Medicare 1/2 Social Security

6 The most important thing Employee s Portion (income taxes, 1/2 social security, 1/2 medicare) + Employer s portion (1/2 social security, 1/2 medicare) Is the entire deposit that must be made

7 Form 941 Is a quarterly form So payroll deposits should be quarterly, right?

8 Form 941 Do you think the IRS will wait that long for its money? Do you think the IRS would trust employers with its money for that long?

9 Form 941 Depending on payroll amount, deposits may be due to be deposited every payroll.

10 Pop Quiz What are payroll taxes? Which side is more?

11 Embezzlement Taking something you are entrusted to but misappropriating for own gain. Rare that this is the reason payroll deposits not made but does happen. Also if corporate partner steals the money. These cases are usually a strong business, but depending on severity of embezzlement, may not be a full repayment.

12 Embezzlement So let s talk about that employee s part. What if someone embezzles, steals that money. Should the employer who had the money from be liable to repay what someone else stole from them??

13 Embezzlement But what if employer knew? And maybe it wasn t theft, but took the employee s portion to cover other expense?

14 Embezzlement Employee s = Trust Fund = CIV PEN = 6672 and is assessed via Form 4180 interview against anyone willful and responsible

15 Embezzlement Why is this important? If no trust fund assessed against business owner, OIC can be for any amount. If trustfund assessed, OIC can be for any amount but you don t want it to be!

16 Offer in Compromise Advantages Paying less. Repayment of Payroll taxes is significant Timing. Cash flow. Application towards TFRP to avoid any personal assessment (if TFRP assessed or will be)

17 Installment Agreement Disadvantages Can not apply to TFRP or will bust IA. High amounts (although CNC is possible) Hugh interest and penalties repaid. OIC no interest all you are paying back in TFRP with no penalties and interest. Like 25-40% less But sometimes, it is all you have.

18 What else can you do? Shut down. Apply all assets to TFRP.

19 What else can you do? Shut down. Apply all assets to TFRP. Or just shut down because the business is not viable. Bankruptcy (Chap 13 sucks BTW)

20 Essentially The IRS will eat the employer s portion. The IRS is loathe to eat the employee s portion. Because the IRS must credit to employee s 1040 the W-2 stated amount even if the IRS never received a cent! The IRS lost the taxes and is paying a refund for money it never got!

21 So can you see why the IRS gets so pissy about payroll cases? The IRS lost the taxes and is paying a refund for money it never got! Amounts get huge and typically exceed most people s ability to pay. Someone is embezzling money. Isn t that a crime?

22 No one wants a payroll tax problem But it is an opportunity to correct. You got a problem with your business. A lack of control. What people want is a working business that is worth their sweat. Can we help them get that?