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Trust Fund Recovery Penalties

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If you are a business owner, chances are you have to pay payroll taxes. Even if you have a single employee, you need to have a payroll tax system set up to ensure you both pay your portion of the taxes. Every state has its own rules about payroll taxes and which party is responsible for which kind. You need to know about this so you know how much money to withhold from your employee(s).

When you need payroll tax debt help and relief in Denver, Colorado or anywhere in the U.S., turn to BC Tax. We can help resolve many small business tax-related issues, including payroll tax levies, business tax, sales tax debt, state tax debt relief and more.

How Payroll Taxes Work

Businesses that hire full- and part-time workers must withhold employment taxes from these workers’ paychecks. Required employment taxes include social security, excise and railroad retirement, if applicable. The employer must collect these funds on a regular schedule and remit the collected taxes to the federal government by specific and non-negotiable deadlines.

The employer collects the taxes and holds these funds in a trust, and by the due date, they are to release the funds from the trust to the federal government. Failure to remit these taxes may mean the government will assess a Trust Fund Recovery Penalty.

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What Is the IRS Trust Fund Recovery Penalty?

The Trust Fund Recovery Penalty, commonly known as the TFRP, allows the Internal Revenue Service to collect a liability from a “responsible person” who it believes “willfully” failed to pay employment taxes. The liability may include seizing the responsible person’s personal assets.

Of course, the IRS includes a corporation’s officers and directors as responsible parties. But it may also count third-party payers or corporations, including payroll service providers. Nonprofit board members, employees and anyone with the authorization to direct payroll tax collection and disbursement could also be liable for the TFRP. Ultimately, the “responsible person” could be one person or many people, as long as the individual or group can collect, record and pay trust fund taxes.

Identifying the responsible party is only half the story. The IRS must also prove that the responsible party knew about, or should have known about, the payroll tax collection and disbursement requirement. The IRS must also show that the responsible party “willfully” ignored tax collection and disbursement laws. The IRS does not have to prove bad intent — only negligence.

Once the IRS believes that the responsible party willfully failed to remit payroll taxes in a timely fashion, it calculates a TFRP penalty. It calculates the TFRP by adding the unpaid withheld payroll taxes to the employee’s withheld FICA taxes.

If you received a notice from the IRS that it plans to levy the TFRP, it’s essential for you to respond quickly. There’s a time limit on responding, and failure to do so means the IRS reserves the right to collect the unpaid taxes using the responsible party’s personal assets. These collection actions could include tax liens or seizures.

Our Payroll Tax Relief Process at BC Tax

At BC Tax, we make it our mission to help business owners get through the payroll tax process. We can look over your past tax returns for the business and make sure that you have been filing payroll taxes the right way. If not, we can make suggestions for the future to minimize your expenses and your chances of being audited. Whether your business is big or small, we can provide you with a plan to follow.

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If you’ve received a notice that the IRS plans to assess the TFRP, get in touch with BC Tax. We’ll provide a complimentary consultation that will assess the scope of work required to resolve your case. Next, we’ll assign one or more Enrolled Agents to collect documentation, examine your records and returns and mount a fair and thorough defense. Do not attempt to complete IRS Form 4180 on your own or submit to the 4180 interview without professional representation from BC Tax.

If we find irregularities, we can help. BC Tax can recommend strategies and procedures that will help your business prevent problems like a payroll tax levy. The process includes setting up systems that will help your business calculate, withhold and remit payroll taxes correctly and on time. We can also help negotiate a Trust Fund Recovery Penalty Offer in Compromise and provide other business tax services.

Rely on BC Tax for Small Business Tax Help in Denver, Colorado and Beyond

If you do not file payroll taxes properly, you could end up paying more than your share for your employees. This may not make much of a difference with one or two workers, but it will if your mistake is on a large scale.

The team here at BC Tax is completely up to date about current tax laws. We will make sure that you are in line with them. Whether you’re located in Colorado or somewhere else in the United States, BC Tax can help with business tax, state tax debt, sales tax debt relief and more.

Give us a call today at (800) 548-4639 or contact us online to set up your free payroll tax evaluation. We would love to show you just how much we can help.

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