When a business withholds payroll taxes but fails to remit them to the IRS, it faces serious repercussions. It is important to take immediate action after receiving a notice from the government. This situation not only impacts the financial health of your business but also carries potential legal consequences.
The IRS is stringent about payroll tax compliance because these taxes fund critical social programs. When building a case against a business for unpaid payroll taxes, the IRS will generally look for:
- Evidence of withheld but unpaid payroll taxes
- Documentation or lack thereof supporting tax filings
- Intent or negligence in failing to pay the taxes
These points help the IRS determine whether the non-payment was due to oversight or deliberate evasion.
What defenses are available?
It is intimidating to face the IRS. First, it is important to carefully review the allegations. If the allegations are an error, it is important to put together a response quickly.
It is wise to begin considering resolution options if you believe the allegations are correct, even if only in part. You can fight back, providing the IRS with evidence to refute the claim. If there is overwhelming evidence of a failure to pay, it is important to begin working to mitigate the possible penalties. If the IRS can establish that the failure was intentional, they could push for criminal penalties that could include imprisonment.
What is the proper response to this notification?
Once you choose whether to fight, negotiate, or settle you will need to respond to the IRS notification. Review the notice carefully to understand the specifics of what the IRS claims you owe and prepare all financial records related to payroll taxes for easy reference while building your case.
This organized, proactive approach can help you address the issue comprehensively.
Receiving a letter from the IRS regarding unpaid payroll taxes is a serious matter that requires immediate and careful attention. Understanding what the IRS looks for in building their case and employing effective defense strategies can help mitigate the impact on your business.
