Finding Real Life Solutions To Your Tax Problem

Part 2: How can I resolve a potential IRS payroll tax problem?

On Behalf of | Nov 15, 2022 | Corporate Taxes |

Payroll tax problems are not uncommon. Businesses can find themselves short on cash and unable to pay their tax obligations for any number of reasons. Business owners and partners may hope to have funds available by the time the Internal Revenue Service (IRS) reaches out for payment.

Unfortunately, tax obligations will continue to grow, quarter after quarter. What began as a relatively small financial obligation can skyrocket leaving the business to wonder how they could possibly make these payments. To make matters even worse, when the IRS reaches out, they are likely to expect more than just payment of the taxes due. They may also assess additional interest and penalties.

What should I do if the IRS assess a payroll tax bill that we cannot afford?

It is important to find a way to address the issue. Options can include:

  • Offer in compromise. This is an agreement between the taxpayer and the IRS where the IRS agrees to accept payment and settle the liability for less than the business actually owes the IRS.
  • Abatement payments. In some cases, the IRS will allow for relief from the penalty through abatement.
  • Installment agreement. This option results in a payment plan with the IRS over an extended period of time.

Note: bankruptcy is not enough. A business who has a successful petition for relief through bankruptcy will not result in removal of the tax obligation. Instead, the IRS could come after a responsible party — targeting an individual with financial authority in the business such as an owner, operator, or partner to personally pay the tax obligations through use of the Trust Fund Recovery Penalty (TFRP).

These issues are complex. It is important to get an attorney with experience in this niche area of business tax law to better ensure your interests are protected and mitigate the risk of any surprises.


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