SO YOU DON’T WANT TO PAY THOSE PAYROLL TAXES…..

…….Or, beware of what you seek

The IRS is the largest, most powerful collection agency in the world. The monster is alive and well. The Service has become very active in the auditing and monitoring of businesses that do not pay their payroll taxes.

I have always been amazed by the number of businesses that think the solution to their cash flow problems is to not pay the payroll taxes. Business owners and anyone that signs checks or reports, or is responsible for payroll preparation in any form are liable! That is correct. If you are the trusted bookkeeper that prepares the payroll, you are liable for the taxes. If you are the owner that just assumes the taxes are being paid, you are liable.

We have clients that owe back taxes for extended periods of time. Essentially there are very few options. You may pay the taxes in full and get on with life. You may do an installment plan. This exercise very seldom retires the liability since the interest continues to be applied.

Or, you may attempt to do an “Offer In Compromise.” This choice allows you to pay less than you actually owe. These are the guys that you see on TV with the big smile. The problem with this approach is that very few businesses qualify. This is not a negotiation. It is begging at the highest level. An overwhelming number of offers are rejected. If you have any assets either personal or business, the chance of an offer being accepted is remote. The Service will simply attach those assets and keep on billing.

The penalty for non-payment is very high. It is not unusual to see penalties that double the tax amount. In the old days, the IRS was very lenient on collections. It was rather easy to get both penalties and interest charges waived. Those days are over. The Government is aggressively seeking compliance with the payroll laws. They are in no mood to negotiate. They have allocated significant resources to perform the task.

In our next blog, we will let you know some of the things that came out of a recent payroll tax audit by the IRS. You will be shocked at the things that they look for and the things that you, as a business owner, are liable for.

Steve Cook is the managing member of Cook, Gola and Company, PLLC, certified public accountants with offices in San Antonio and Austin, Texas.