Yesterday I received a phone call from the person (we will call "Bob") who received a notice from the Internal Revenue Service that stated he was personally liable for the payroll taxes linked to his small business. Bob couldn't understand why. He had incorporated his business and thought that incorporating protected him from any personal liability for the payroll taxes. Unfortunately Bob was simply wrong. The payroll taxes such as the federal withholding, social security and medicare taxes are typical called "Trust Fund" taxes. This is because the employer is in charge of deducting these taxes from the gross payroll check of the employee. The employer must then send these tax payments to the IRS. When someone who has the responsibility to withhold and pay these taxes does not, then a Internal Revenue Service can assert the Trust Fund Recovery Penalty beneath the authority of code section 6672 of the IRC. 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 In relation to Bob and his business, his business was experience some financial difficulties because he had customers who have been slow to pay. So Bob paid his employees their net check but then does not send payment to the IRS for the federal withholding, social security and medicare taxes that Bob withheld from their payroll checks. That is usually the most frequent scenario a business runs into. Before the Internal Revenue Service will assess the Trust Fund Recovery Penalty, they have to determine who the responsible party was for the business and perhaps the responsible party acted willfully. A responsible party is a person who has the authority to collect the money and pay the expenses for the business. It's a person who has the capability to sign checks, make cash deposits and figure out what vendors get paid. A responsible party can also be someone who is able to control the hiring and the firing of employees. Inside our scenario, Bob did have the authority to hire and fire employees, sign the checks and determine who got paid and who didn't get paid. Bob could control the outgoing cash payments to vendors and employees. So he's considered a "responsible party" by the IRS. Once the Trust Fund Recovery Penalty is assessed someone can have 60 days to react to the notice. If someone does not respond within 60 days, then a penalty is likely to be automatically assessed. There are numerous defenses to the assessment of this penalty which will be the subject of the next article.
0 Comments
Leave a Reply. |