IRS Payroll Tax Audits a Financial Nightmare

Written By: Martha De la chaussee

Payroll Tax Audit & Debt Expert

The Internal Revenue Service is hitting employers hard with payroll tax audits. It is known that some industries are being hit harder than others. Why?

Industries such as Trucking, Construction, Warehousing, Clothing Manufacturing, Restaurants, any manufacturing and industrial and those who report Form 1099 Independent contractors create flags for payroll tax audits.

The reason is that both the IRS and State Employment Tax Agencies verify if those companies who are reporting independent contractors are not misrepresenting these workers as such and not employees.

People ask why would a company or business not treat workers as employees and instead as independent contractors? One reason is that the company does not have to report or pay their share of payroll taxes for social security. No costs of payroll processing, check processing, reporting and paying payroll taxes to IRS and others. Lower or no Worker’s Compensation insurance and more.

Some workers think that by allowing to be paid via cash instead of by check they do not have to file and pay individual taxes. Thus, more take home pay. Not realizing that this can have future detrimental financial consequences.

For example, if a worker who is paid cash and not reported by a person or company as an employee will not qualify for disability benefits state or federal, not be able to get Worker’s Compensation for injuries on the job, no social security benefits for no wages or salaries are being reported as earned to Social Security administration.

Employers who fail to report workers as employees can face a financial nightmare and large fees for payroll tax representation via a Tax Attorney, CPA or Enrolled Agent. In addition, costs of supplying records, copies, interviews, appeals, and Court Costs for payroll tax audits.

Costs of payroll tax debts can include tax liens, levies (garnishment of assets) such as bank accounts, accounts receivable, notes receivable, seizure and sale of all business and individual assets.

Do not think that Corporations, LLCs, LLPs and Non-Profits are immune to personal liability. We all know that sole proprietors are fully liable for all business debts.

However, many do not know that payroll tax debts can also be billed and collected from Corporate Officers, Employees, Third-parties, Partners, Limited Partners, Directors, and others who had authority and control of financial decisions of a company who owes payroll debts. Research Internal Revenue Code 6672 via google. Or, the Internal Revenue Code itself.

Google www.irs.gov for trust fund recovery penalty as well for potential individual responsibility for non-payment of payroll debts.

Google California or other state employment tax agency for personal responsibility for unpaid payroll taxes.

Bankruptcy will not resolve payroll tax debts. These types of debts are not dischargeable in bankruptcy. No type of bankruptcy will discharge payroll tax debts. Although, part of a payroll tax debt can be declared un-collectable. However, only experienced payroll tax debt representatives know how this is feasible.

I cannot reveal the more than twenty-six ways that payroll tax debts can be resolved by payroll tax relief experts. However, do your own research and vetting prior to hiring a tax representative to help you with payroll tax issues. Not every Tax Attorney, CPA or Enrolled Agent wants to represent or knows how to represent entities with these types of payroll cases.

For the most part, payroll taxes just like any tax processes and procedures require training, knowledge and expertise in the tax problem faced by entities. Just like not all tax preparer's know how to prepare Corporate Tax Returns. Or, Certified Public Accountants who only dedicate their expertise in complex tax return preparation and do not want to work audits or other tax issues.

There are payroll tax audit and debt representatives who know the right resolution options according to the type of case that a potential client is facing. Do not accept promises of offers in compromise or settlements.

These options are not known until a true tax professional analyzes your case from account transcripts, audit reports, notices & letters you receive and even possibly in many cases full financial analysis to determine ability to pay the tax agencies.

For more information, resources and articles go to www.advocatetaxgroup.com

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