If you're a small company owner maybe you've heard the horror stories on what the IRS can personally come after you for delinquent payroll taxes. If it's this that you are facing at this time you then must continue to read this important article. The main reason a person will incorporate a business is to form a separate legal entity whereby if something goes wrong in the commercial, a person's personal assets will undoubtedly be protected. However there are several exceptions to the fundamental rule and one of these exceptions is when it comes to payroll taxes. read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more click here website read more As an employer, whenever you withhold payroll taxes from your employees'paycheck you have to within a certain amount of time change and pay these taxes back again to the IRS or other local tax authority. As you are withholding these taxes and creating a payment on behalf of your employees you've entered right into a fiduciary relationship with the IRS whether at this point you it or not. The IRS is trusting you, the business owner to make these payments as prescribed by law. The problem arises once the employer withholds the taxes from the employee's paycheck but then does not send the payments to the IRS or other local taxing authority. The trust fund taxes refer only to the taxes withheld from the employee's paycheck including the federal withholding taxes, and one-half of the social security and medicare taxes. Many business owners who borrow from their workers paychecks end up not paying anything to the IRS and figure no harm. They mistakenly belief that because they are incorporated then your IRS can only just pursue the business itself. If the business owner features a struggling business, they may simply close up shop and walk away. But a few years later the business owner may be given a notice from the IRS. This notice will claim that the IRS has determined that the business owner is a responsible person and is personally liable for a large number of dollars in back taxes with interest and penalties. If you may not pay immediately then they will file a lien against your personal property including your house. How do the IRS due this? When payroll taxes are owed to the IRS, they will turn to see who was simply responsible for the reporting and payment of the payroll taxes. The responsible person in the eyes of the IRS could be one person or several people. It could be the shareholder, or president of the business or the bookkeeper of the company. The IRS may hold you out to function as responsible person if you had everyday control over the finances of the business or if you decided what bills to pay for in what order. If you had check singing authority for the business or even although you simply approved the payroll or employees time sheets. The determination on whether an individual is a responsible person is a certainly one of fact and the IRS will apply a couple of criteria to determine who can be a responsible person. If this happens to you then the first type of defense would be to assert that you are not actually a responsible person because of several factual reasons. Maybe you had the title of Chief Financial Officer but no real authority or power. Maybe you became the bookkeeper after the time the taxes were withheld and never paid. However all of this depends upon a variety of facts that really must be ascertained after the fact. In case that you cannot escape being labeled a responsible person, then you can declare that you willfully did not pay the taxes. There is no exact definition as to whether a responsible person was willful or not but a number of the factors that the IRS may look at are: (1) If you knew that the business was delinquent in paying its payroll taxes. (2) If you acted recklessly or with gross neglect. For instance did you spend yourself a sizable bonus in place of paying the payroll taxes. Another defense to the assessment of the Trust Fund Recovery would be to assert that during the time you're the responsible person you exercised reasonable care in your duties. Again the IRS does not have any strict definition about what reasonable care might be and this depends upon the factual situation. However a good example will be a bookkeeper who prepares the payroll and gives every one of the checks to the business president but the business president does not pay the payroll taxes. In this instance it could be successfully argued that the bookkeeper acted with reasonable care.
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