Let’s be honest. Most business owners don’t wake up in the morning, go to work and say, “I’m not paying my payroll taxes.” One week you might be short of cash. Maybe business is slow or a customer’s check bounces. There are several legitimate issues that can prevent you from paying the IRS.
You know you’re a good person. You figure you’ll make it up the next week. But then next week comes and goes, and you realize you still don’t have enough money to make that payroll tax deposit. Eventually, the entire situation starts snowballing into an avalanche.
Between paying your employees their regular paychecks and paying the IRS the necessary payroll taxes, it can be hard being a small business owner these days. A lot of times when money is short, small business owners pay the employees first. It’s natural to take care of your employees, even if you have to skip paying yourself.
Unfortunately, the IRS doesn’t care if you can’t pay your employees, or even if you have to put them out on the street. They don’t care if you can’t collect your receivables, or if your biggest customer just went belly-up. All they care about is this one simple fact: you have money that belongs to them.
After you endure long hold times in hopes of making arrangements by phone, the IRS will ask you for all your personal and financial information—which will ultimately be used to levy your bank accounts, take your receivables and seize your property. Owing 941 payroll taxes is a different animal than owing 1040 income taxes and can turn into a criminal matter quickly. That’s because the money you owe them for payroll taxes has already been deducted from your employees’ paychecks for withholding purposes. To put it simply, it’s not your money to begin with, and the IRS looks at this as if you stole from them. The IRS gives your employees credit for the withholdings and fully expects you to pay this amount over to the IRS at the same time you pay your employees.
The smartest thing you can do to protect your business and family is to have someone represent you—an expert who deals with the IRS for a living. Not only can they protect you from the IRS calling and showing up at your door, they may be able to get those penalties reduced. In some cases, they can have them completely removed. You’ve worked hard to keep your business open. You don’t have to wait until the IRS has seized your accounts, closed your business and added on penalties to get the help you need. You have the right to be represented. Remember, for every tax problem, there’s a solution.
Constant W. Watson III, CPA, CTRS, is both a Certified Public Accountant and one of only ten Certified Tax Resolution Specialists in the State of Illinois certified by the ASTPS. Watson has more than 30 years of income tax and accounting experience. You can hear his radio program, “Watson On Taxes,” every Saturday morning at 10 a.m. by tuning in to AM 1390. For more information, visit WatsonOnTaxes.com or call (708) 206-9900.