Owing back payroll taxes puts you and your business in jeopardy from the IRS. Rather than avoid paying what you owe, you can deal with this obligation effectively and in a timely manner by using any of the 12 ways to resolve unfiled payroll taxes.
The Possible Consequence of Unpaid Payroll Taxes
The IRS takes unpaid payroll taxes seriously. It will make every effort to collect what you owe even if it means taking legal actions against you or your business.
When you fail to settle your back-payroll taxes, you could be imprisoned by the IRS. The IRS can also heavily fine you, including an assessment of penalties up to 33 percent of what you already owe.
In the worst-case scenario, you might lose your business entirely. The IRS may shutter it and sell it off to pay back the payroll taxes that you owe.
Understand That Some Businesses Deal with Tax Delinquency
That being said, it is also important for you to realize that tax delinquencies happen to the best of business owners. It may not even be your fault. A vendor or client might have gone out of business without paying his or her invoices.
You in turn must dip into your cash flow just to pay your regular business expenses. You have nothing left with which to pay your payroll taxes. Even so, the IRS still expects you to pay on this tax obligation on time and without fail.
Take Action Right Away
When you realize you owe back payroll taxes, you should take the necessary action right away. Avoiding this obligation or ignoring it altogether will only make the situation worse.
The IRS could close your business, put you in jail, and investigate your employees. You should use on the available options like an installment agreement to settle what you owe and save your business. You should also consult with a tax resolution specialist who can help you keep your business open while you pay off your back-payroll taxes.
Get Current on Your Past Returns
You can get current on your past tax returns by filing the most recent one first. After you file the most current return, you should work your way backward and file the remainder of the past returns. You should do this even if you do not have the money to pay what you owe.
If possible, you should set aside money to pay your most current return's amount first. You can then make payments on the rest, showing good faith to the IRS that you are serious about getting caught up with your back-payroll taxes.
Don't Contact the IRS on Your Own
You should avoid talking to the IRS on your own. The agent on the other end of the line could lead you to implicate yourself. He or she may ask leading questions about your employees, its function, and other details.
Instead, you should hire a tax resolution specialist to contact the IRS for you. This tax pro will know what information to give and will avoid implicating you for something you did not due or for which you are not responsible.
Enlist the Help of a Tax Specialist
A tax specialist can be a valuable ally in the effort to resolve your back-payroll taxes. This professional can protect you from IRS collections. He or she can also advise you on the various tax relief programs that are available to you.
For example, your tax resolution specialist might advise you to pursue an Offer in Compromise, which could eliminate your entire tax debt. You also could request a penalty abatement, which could get rid of the penalties and interests on your tax obligation.
Make Any Current Payroll Tax Deposits
You should make every effort to make any current payroll tax deposits when striving to resolve your back-payroll taxes. You should take care of your current payroll deposits first before entering any negotiations with the IRS.
This step helps you avoid getting any further behind with what you already owe. You must pay the current payroll tax deposits if you want the IRS to speak with you about resolving the delinquent tax obligation.
File Form 433-BYou also will need to file Form 433-B, which can be found on IRS.gov. This form allows you to give details about your business to the IRS. It discloses your business's:
Provide All Necessary DocumentationThe IRS will also insist that you provide all the necessary documentation before it will negotiate on what you owe. The documentation it may request includes:
- Bank statements
- Year-to-date profit and loss statements
- Copies of your business's monthly bills
- Accounts receivable aging reports
- Recent payroll summaries
- Proof of federal tax deposit statements
Request an Installment Agreement in Writing
If you want the IRS to set you up on an installment agreement, it is critical that you make this request in writing. When making the written request, you should indicate how much you believe you can pay each month. The amount must be reasonable and in line with what your business earns.
You should also include the date and the amount for the applicable tax year. These details are important in case you want to change or dispute something later. It also prevents the request being confused with another tax year.
Follow the IRS DeadlinesOnce the IRS gives you deadlines for completing returns, submitting documentation, making payments, and other matters, it is critical that you do not ignore these dates. Failing to comply with the deadlines could put your business in jeopardy of being shuttered and you being put in jail or heavily fined.
You also could have your business's assets frozen or garnished. To protect valuables like company equipment or accounts receivable, you should abide by the deadlines the IRS gives to you.
Learn About Your Rights and Options as a Taxpayer
As a taxpayer, you have rights even if you owe the IRS money. By law, you must be informed about the tax resolution options available to you.
You also have the right to hire representation whenever you are dealing with the IRS. A tax resolution specialist has the experience and training to act as your intermediary between the IRS and you.
These strategies may allow you to satisfactorily resolve your back-payroll tax issues. They give you the opportunity to file back tax returns. You also can pay on what you owe via an installment agreement or Offer in Compromise. You can decide what options are best for you and learn more about your taxpayer rights by hiring a tax resolution specialist to help you today.