You Think YOU Have Payroll Tax Problems?
Wait Until You See Who’s Not Paying Payroll Taxes Now!
IRS has always relentlessly and passionately pursued
employers who are delinquent on their payroll taxes.
The Service tends to be rather unforgiving because
IRS still has to honor thewithholding from workers’
paychecks – and to issue refunds – even if IRS has never
been paid by the employer. And the Social Security
Administration still has to credit the workers’
Social Security account, even if the SSA hasn’t received
the money from the employer.
If you have employeess, you may have faced the wrath
of IRS. Heck, you’re hit with penalties even if you
pay your taxes – but send the money in a day late.
In fact, even if you’re incorporated, if your company
doesn’t pay its payroll taxes, IRS will pursue you
personally for that money – and you can’t bankrupt
unpaid payroll trust fund penalties.
Worse, I recently heard from a young woman who worked
for an company where her bosses took large chunks of
bonus every year without paying payroll taxes on those
sums. And even though she and the company’s CPA repeatedly
advised them and pestered them to pay taxes on those
bonuses, the owners refused. And this young woman, who
was only an employee, is now faced with $100,000 worth
of payroll tax debt on a business she didn’t own and
on payroll taxes on her bosses own compensation!
So, could someone please explain to me why IRS isn’t
collecting from one of the biggest payroll delinquents
on their books – the Federal, State and local governments?
Federal government entities owed about $45 million in
delinquent employment taxes through December 2006,
according to a report issued on August 27, 2007 by the
Treasury Inspector General for Tax Administration (TIGTA).
And as of January 2007, an additional $254 million
was outstanding in delinquent State and local
government entity accounts.
That’s nearly $300 million in payroll taxes owed by
What is IRS doing about it?
Well, if you read the TIGTA report, it essentially
says that IRS is devoting millions of dollars towards
setting up and implementing procedures to track the
causes of the problem and to settle the cases.
The report points out that it’s not clear whether IRS
is just closing cases or collecting the money, from the
way case resolution information is recorded.
“For example, the special unit established at the Brookhaven
Campus does not routinely track information regarding how
these cases are resolved (e.g., was the money collected
or the account adjusted)”
Meanwhile, on the small business front, I just got a
call from a Revenue Officer who’s about to place a
lien on a small business, even though we’re actively
working the case with her, and the taxpayer is prepared
to pay the taxes in full – as soon as we agree what the
balance is. (IRS posted an extra couple of thousand
dollars in one of the quarters, so the balance of the
taxes, penalties and interest need to be recomputed
before the case settles.)
Why is she putting this unnecessary lien on the business?
Because her manager is getting pressure from above to
close files. Not to collect money. But to close files.
So, here we stand, ready to give IRS money, but their
policy is to close files. So IRS stands ready to
disregard the payment they could get in a couple of
weeks, and just close the file by filing a lien.[Note: A lien is public record of a debt. It does not
give IRS any instant money. All it does is mess up the
credit of a small business, raising their cost to get
loans to pay their tax debts.
A levy is an actual attachment of an asset, like a bank
account, or inventory, or accounts receivable.]
Does that mean IRS will do the same kind of thing with
the government debt, too? Just adjust the balances due,
or file liens and forget it, and never collect?
Or will IRS take the same kind of actions against the
responsible parties in the government agencies who are
not paying their payroll taxes as they do in the
small business world? Will IRS hold the managers and
decision-makers personally responsible and pursue them
to collect the millions of dollars owed?
Wouldn’t you like to see the decision-makers held
personally responsible? The politicians who think
other expenses have a higher priority than their
employees payroll taxes?
Naturally, if IRS were ever to go the route of
holding a person individually responsible, it’s apt to
turn out to be the department’s payroll clerk – not
the managers who set the budgets and determine what
gets paid. They usually manage to become immune,
have you noticed?
- Ask TaxMama :: Where taxes are fun and answers are free
Treasury Inspector General for Tax Administration (TIGTA) Report :: Efforts to Collect Delinquent Employment Taxes Owed by Government Entities Could Be Improved