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The IRS is very aggressive on delinquent payroll tax liability

The IRS is Very Aggressive on Delinquent Payroll Tax Liability

The IRS is very aggressive in their collection attempts for past due payroll tax liability. The penalties assessed on delinquent payroll tax liability or filings can dramatically increase the total amount owed in a matter of months. We believe that it is critical to have a CPA, Attorney, or Enrolled Agent represent taxpayers in how to reduce your payroll tax liability in these types of situations. How you answer the first five questions asked by the IRS may determine whether you stay in business or are liquidated by the IRS. You should avoid meeting with any IRS representatives regarding past due payroll tax liability or any tax until you have met with an accountant to discuss your options.

IRS Payroll Tax Liability Liens

The IRS can make your life miserable by filing federal tax liens so you need a CPA who knows how to reduce your payroll tax liability. Past due payroll taxes often trigger Federal Tax Liens which are public record that indicate you have a payroll tax liability. They are filed with the County Clerk in the county from which you or your business operates. Because they are public records they will show up on your credit report. This often makes it difficult for a taxpayer to obtain any financing on an automobile or a home. Federal Tax Liens also can tie up your personal property and real estate. Once a Federal Tax Lien is filed against your property you cannot sell or transfer the property without a clear title. Often taxpayers find themselves in a Catch-22 where they have property that they would like to borrow against, but because of the Federal Tax Lien, they cannot get a loan. Consult a CPA on how to reduce tax liability and remove the tax liens.

IRS Payroll Tax Liability Levy

An IRS levy is the actual action taken by the IRS to past due payroll taxes. For example, the IRS can issue a bank levy to obtain your cash in savings and checking accounts. Or the IRS can levy your wages or accounts receivable to satisfy the payroll tax liability. The person, company, or institution that is served the levy must comply or face their own IRS problems. The additional paperwork this person, company or institution is faced with to comply with the levy, usually causes the taxpayer’s relationship to suffer with the person being levied. Levies should be avoided at all costs and are usually the result of poor or no communication with the IRS or a CPA on how to reduce payroll tax liability.

When the IRS levies a bank account, the levy is only for the particular day the levy is received by the bank. The bank is required to remove whatever amount is available in your account that day (up to the amount of the past due payroll taxes) and send it to the IRS in 21 days unless notified otherwise by the IRS. This type of levy does not affect any future deposits made into your bank account unless the IRS issues another Bank Account Levy for the payroll tax liability.

An IRS Wage Levy is different. Wage levies are filed with your employer and remain in effect until the IRS notifies the employer that the wage levy has been released. Most wage levies take so much money from the taxpayer’s paycheck that the taxpayer doesn’t have enough money to live on.

IRS  Payroll Tax Liability Audit

The IRS can audit you by mail, in their offices, or in your office or home. The location of your audit is a good indication of the severity of the audit. Typically, correspondence audits are for missing documents in your tax return that IRS computers have attempted to find. These usually include W-2’s and 1099 income items or interest expense items. This type of audit can be handled through the mail with the correct documentation. The IRS office audit is usually with a Tax Examiner who will request numerous documents and explanations of various deductions. This type of audit may also require you to produce all bank records for a period of time so that the IRS can check for unreported income. The IRS audit schedule for your home or office should be taken more seriously due to the fact that the IRS Auditor is a Revenue Agent. Revenue Agents receive more training and auditing techniques than a typical Tax Examiner. All IRS audits should be taken seriously because they often lead to other tax years and other tax deductions not originally stated in the audit letter. Consult an Accountant immediately on how to reduce tax liability in case of an audit.

IRS Payroll Tax Liability Seizures

The IRS has extension powers when it comes to Seizure of Assets to pay past due payroll taxes. These powers allow them to seize personal and business assets to pay off outstanding payroll tax liability. This occurs when taxpayers have been avoiding the IRS. The IRS attempts to collect amounts owed with a seizure as the ultimate act of their collection efforts. Consult an Accountant immediately on how to reduce tax liability and avoid any asset seizures.

Unfiled Payroll Tax Returns

Many taxpayers fail to file required returns and find themselves with past due payroll taxes for many reasons. The taxpayer must be aware that failure to file tax returns may be construed as a criminal act by the IRS. This type of criminal act is punishable by one year in jail for each year not filed. Needless to say, it’s one thing to have a payroll tax liability but another thing to potentially lose your freedom for failure to file past due payroll taxes. The IRS may file “SFR” (Substitute For Return) Tax Returns for you. This is the IRS’s version of an unfiled tax return. Because SFR returns are filed in the best interest of the government, the only deductions you’ll see are standard deductions and one personal exemption. You will not get credit for deductions which you may be entitled to such as exemptions for spouses, children, interest and taxes on your home, cost of any stock or real estate sales, and business expenses, etc. Regardless of what you have heard, you have the right to file your original tax return, no matter how late it’s filed.

IRS Penalties

The IRS penalizes millions of taxpayers each year. They have so many penalties that it’s hard to understand which penalty they are hitting you with.

The most common penalties are: Failure to File and Failure to Pay. Both of these penalties can substantially increase the amount you owe the IRS in a very short period of time. To make matters worse the IRS charges you interest on penalties.

Many taxpayers often find out about IRS problems many years after they have occurred. This causes the amount owed to the IRS to be substantially greater due to penalties and interest.

Some IRS penalties can be as high as 75%-100% of the original taxes owed. Often taxpayers can afford to pay the taxes owed, however the extra penalties make it impossible to pay off the entire balance.

Consult a CPA immediately on how to reduce tax liability and avoid all these serious issues.

About 

Gustavo A Viera is the managing partner of Gustavo A Viera, PA. His experience spans more than 25 years. He started his career in public accounting at PriceWaterHouseCoopers where reached the level senior audit manager. His Fortune 500 experience includes positions as CFO – Latin America Region for both Hewlett Packard and Telefonica of Spain. Gustavo also writes a blog twice a week that addresses trending accounting and tax issues. He is an SBA Advisor and teaches workshops for aspiring entrepreneurs. His office is located at One Alhambra Plaza Floor PH Coral Gables FL 33134, and is admitted to practice in the State of Florida as a licensed Certified Public Accountant. Gus welcomes questions and he can be reached at 786-250-4450.

About the Author

Gustavo VieraGustavo A Viera is the managing partner of Gustavo A Viera, PA. His experience spans more than 25 years. He started his career in public accounting at PriceWaterHouseCoopers where reached the level senior audit manager. His Fortune 500 experience includes positions as CFO - Latin America Region for both Hewlett Packard and Telefonica of Spain. Gustavo also writes a blog twice a week that addresses trending accounting and tax issues. He is an SBA Advisor and teaches workshops for aspiring entrepreneurs. His office is located at One Alhambra Plaza Floor PH Coral Gables FL 33134, and is admitted to practice in the State of Florida as a licensed Certified Public Accountant. Gus welcomes questions and he can be reached at 786-250-4450.View all posts by Gustavo Viera →

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