Business 940 and 941 tax issues are much more severe than income tax issues. Tax relief in the form of Chapter 7 Bankruptcy, available in limited situations for income tax situations, has been taken away for payroll and withholding tax debts. That is because this is other people’s tax money that is held in trust by the business owner, to be handed over to the IRS. The IRS is extremely aggressive in these situations. They would just as soon seize your business assets, sell those assets at auction, then close you down, putting you out of business, than allow you to continue getting behind on payroll taxes.
The IRS also has a large “stick” for business owners who get substantially behind, and are deemed as a “responsible party”. That “stick” is the 100 percent Trust Fund Recovery Penalty. Whether they assess this penalty or not, can be the death knell of a company. We know of situations, where the taxpayer thought they were doing the right thing, yet communicated the wrong thing to the IRS, and the Trust Fund penalty was assessed. Sending the wrong signal to the IRS is a matter of knowing what they are looking for, IRS precedent, and understanding of how the IRS is currently handling these situations. Only then would it be prudent to talk to the IRS about payroll tax issues yourself.
The responsible person, for Trust Fund Recovery Penalties, is anyone whose duty was to make an accounting of what was owed, collect the funds, and then pay them to the IRS. Partnership members, Non-Profit Directors or Members of the Board, Officers or any employee responsible for payroll in a Corporation, and anyone that might be classified as controlling the funds of a company, that should be turned over to the IRS.
Meeting with the IRS in these situations is not advisable, as any meeting could in fact turn into an interview called the Non-Assertion Interview, which is used to determine who is responsible for paying the Trust Fund Recovery Penalty. The IRS can go after personal assets to satisfy the Civil Penalty, or Trust Fund Recovery Penalty. It is best to have a Seasoned Tax Professional look your case over, to make recommendations on the best approach for dealing with the IRS. Then we can proceed with determining all of the options in the Internal Revenue Code for dealing with your business needs. Your business is your lifeblood; give it the care it deserves by having a well trained tax professional handle the payroll and withholding issues.