Business owners frequently say, â€œour employees are our greatest asset.â€� Keeping your greatest â€œassetâ€� happy, comes with a cost. Wages, benefits, and other perks are significant expenses for many businesses. So are payroll taxes. Sometimes the business becomes financially strapped, for whatever reason. In an effort to alleviate this financial quagmire, some businesses delay paying payroll taxes as a form of a short term â€œloanâ€�.

Doing so will make a small business owner, along with any â€œresponsible personâ€� who willfully failed to collect and remit the payroll taxes, personally liable. This liability is commonly called the â€œtrust fund recovery penaltyâ€�. Individuals can be personally liable for the trust fund recovery penalty even if the business is set up as a C-Corp, S-Corp or limited liability company. Additionally, more than one person can, and frequently is, held responsible.

To determine who is responsible, the Internal Revenue Service (â€œIRSâ€�) will cast a broad net. Oftentimes, this is a very fact specific process. The IRS will conduct interviews with various individuals to attempt to determine who is a responsible person. In an interview, the IRS will typically ask the interviewee about their role and responsibility within the company, their authority concerning financial matters (authority to pay one creditor over another, sign checks, etc.) and their knowledge of the delinquent tax issue. Inevitably, this results in a great deal of finger pointing. After responsible person(s) have been determined, the IRS may take enforced collection action. This can include the filing of tax liens and/or levying accounts.

If you have received notification that there are outstanding payroll tax issues associated with your business or your employer, the attorneys at Menn Law Firm, Ltd., may be able to help. We regularly advise and represent clients dealing with payroll tax issues. Various forms of relief may be a determination that you are not a responsible person, the negotiation of an installment agreement, or an offer in compromise.

For further information or to schedule a personal consultation please email Attorney Mitchell J. Musial (Mitchell-Musial@mennlaw.com). All of our attorneys may be reached by phone at 920-731-6631 to discuss the legal services you may require.

Next Issue:

Have you hired someone for a specific project, and characterized them as an independent contractor instead of an employee? Learn the risks of that choice as they relate to Workers Compensation in next month's article ...
EMPLOYEE OR INDEPENDENT CONTRACTOR: WHAT IS THE IMPACT?

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Menn Law Firm, Ltd., 2501 E. Enterprise Drive, P.O. Box 785, Appleton, WI 54912-0785
920-731-6631