Small Businesses Are at Higher Risk for IRS Audit
It may sound counterintuitive, but smaller businesses have been at increased risk for an IRS audit for some time. This is due in large part to the ways in which they manage their payrolls. While larger businesses often have accountants themselves on the payroll, smaller business owners usually perform this task themselves. In addition, the IRS has discovered that smaller-sized businesses are more likely to evade taxes than larger ones.
So the question then becomes: How do you avoid potential problems with the IRS while simultaneously managing your payroll? At Sodowsky Law Firm, we can help you with your payroll tax problems in Virginia. Contact us today to learn more.
Unpaid Payroll Taxes Can Potentially Destroy Your Business
The IRS is extremely aggressive when it comes to dealing with businesses that are delinquent in paying payroll taxes. This includes fines for late payment, failure to file, and failure to deposit. It can also include interest on delinquent balances and late fees. In some cases, interest and late fees can exceed the amount of taxes you owe.
In addition, the IRS has several remedies at your disposal when you’re delinquent in taxes. These remedies include:
- levying your bank accounts,
- padlocking your doors,
- seizing your property,
- intercepting payments owed you, and
- putting you out of business.
How Do Payroll Tax Problems Happen?
Business owners are savvy. Those who don’t pay their rent can find themselves out of business in a month. Those who don’t pay their suppliers will find themselves without stock. And those who don’t pay their employees will find themselves without a workforce. These represent immediate threats to your business.
On the other hand, the IRS tends to move methodically. It could be months before the IRS doubles down and begins taking making more aggressive measures. Meanwhile, late fees and interest are piling up. By the time you notice what has happened, you might owe hundreds of thousands of dollars in back taxes.
Taxes sometimes take a back seat to more immediate expenses. You do what you have to do to keep your business alive. But now the IRS is knocking on your door saying that they’re going to shut your business down and you can be facing a felony.
Sometimes it’s not the business owner’s fault at all. What happens if you have an incompetent employee who allows the payroll taxes to lapse over a long period of time? In this case, you may not be at fault for the problem, but you are, at least, partly responsible for it. Those taxes will need to be paid.
How an IRS Attorney Can Help
Payroll tax problems happen — even to honest business owners. Debts pile up and you have to make choices. Suddenly, the problem has gotten out of your control. In other cases, an employee is responsible for the payroll tax problems and now the IRS is coming after you.
But the situation isn’t hopeless. You don’t have to sit idly by while the IRS destroys your business and send you to prison. There are options at your disposal. A tax attorney can help you.
Providing Solutions for Payroll Tax Problems
Depending on your situation, a tax attorney can help you negotiate a settlement with the IRS for a repayment plan. You can file an Offer in Compromise for payroll tax debt. But there is a catch.
The IRS is not traditionally happy that this has happened. This is because payroll taxes are divided into two parts: the employer’s contribution and the employee’s contribution. The IRS never received either contribution but ended up refunding money to employees on taxes that it never collected. Someone is going to need to pay for that. By accepting an Offer in Compromise, you can end up moving the liability from the company onto yourself.
It’s tricky. There will be cases when accepting an offer in compromise benefits you and there will be cases where it can cause you serious financial problems beyond just the business.
Talk to a Virginia Tax Attorney at the Sodowsky Law Firm, PC
The tax attorneys at Sodowsky Law Firm can help you negotiate a fair solution with the IRS. If your business is struggling or one of your employees seriously messed up, the IRS may be amenable to repaying in installments or even negotiating repayment for a lower amount. Contact us today.