Do it yourself: Everything you need to know to resolve unpaid 941 payroll tax issues.

It happens, way to often, so your not alone. You have failed to pay your 941 payroll tax,  accruing weekly and very deadly. Why deadly? Because it creates an impossible to avoid enticement, a trap, for cash flow challenged businesses. Once entered into this trap, few successfully emerge intact, as the interest and penalties will eat you alive.

It is a voluntary payment program as most taxes are, so how easy is it to decide to skip the week and pay the net payroll (or whatever bill is most important to your survival at that moment), rationalizing that if you miss a payroll or your phones gets turned off,  your out of business, so you will pay the payroll and the phone bill and not the payroll tax and hopefully make it up next week.

We all know what happens, next week never comes, as you are still running on a limited cash flow and will probably never catch up, despite your best intentions.

Eventually the IRS catches up, as they always do and after a while with a progression of notices warning you of the obligation and their intent to collect the tax due, you are finally sent notices that read, WE INTEND TO LEVY. That’s like the rattling noise from a rattle snake warning you before it strike, a warning you cannot ignore.

They will sweep your accounts, frequently your payroll account included, and typically on a Friday catching your payroll and every thing in all your operational accounts, everything will be removed. Monday will not be very pleasant as your employees will not appreciate not being able to cash their checks. Nor can you operate effectively as everything floating will soon bounce.  Now you have to replace the cash for everything you wrote checks for in order to reach zero before you can write the next check…oh yes its possible that your account is inoperable for a while as you work this out.

Also be aware, the code does not permit the service to levy and remove cash from your payroll account, but they frequently do it anyways. If your payroll account is levied and swept clean, you must call the IRS office handling this matter immediately and demand the payroll money be released. You will have to prove they levied your payroll account.
Once satisfied that it is a payroll account the IRS will fax your bank that they may pay the payroll tax, removing the levy for that purpose. That’s one emergency off your plate.

Some banks take this very seriously and will close your accounts should this happen. It also becomes very difficult to open new accounts in other banks with this occurring, as it becomes a  permanent entry on your credit history and other banks will  refuse to open new accounts because of this. Now try and operate  under that cloud. This is a nightmare.

Here is what YOU may do to alleviate the situation if you choose to handle it yourself.
You must immediately call the IRS office handling your account and ask for an agent in the collection department. Tell them you have been levied and want to work this out.

If an agent has not yet been assigned this may be an early  stumbling block until you get an agent assigned who can handle your issues. Ask for a manager for assistance if there is no assigned agent.

The agent will check a few things first, to determine what your situation is. He will ask if you have filed all the required tax returns due from the offending business entity. Hopefully the answer is yes, as if it is no, you will need to have everything filed before they can work with you, and they will continue to collect until resolved.

Then you must be current for two consecutive quarters before they can work this matter out with you. If you are not, you have to figure out how to become current for the prior two quarters before they will enter into a payment plan, and that is the objective, a payment plan for what is owed, as there is no compromise procedure under the existing circumstances. Now you must fill out forms 433b, the collection form for your business, for the IRS, which will help them determine how much they can extract from it while you pay off the arrears.

Be careful, they will ask for a list of current receivables and if all does not  work out to their satisfaction, they now will know exactly were to go to seize receivables. You must report accurately, as fraud in this situation is foolhardy.

Yes the good news is they will permit a monthly payback program for what is owed…all of it, penalties and interest and corporate contribution as well as trust fund money, everything you were supposed to pay and did not. This form 433B is available on line or your IRS office will provide it to you. The 433B will require some back up documentation for what you are claiming are your cash flow requirements so be prepared to document whatever you are claiming on the 433B form.

Depending upon your 433B information, the IRS will permit a rapid payback of the unpaid, past due payroll taxes. This payback schedule is negotiable but is also based on the information provided. Your business will remain liened until the final payment is made. This is additionally crippling.

6. Of course there is then the responsible party issue. Whomever is deemed a responsible party, presumably the person who signs checks, or makes the decision as to what is paid and what is not, is deemed the responsible party. That person(s) is then liened personally for the entire payroll tax due, meaning the responsible parties personal assets are also available for liquidation to support the payback of the unpaid 941 payroll taxes.

You will be asked to fill out a 433A for collection from the responsible party(s) again this is a difficult situation as it allows the service to compute what they can extract from you on a monthly basis to clear this debt.

This form will be given to you by the IRS agent handling this or you can draw it down from the IRS internet web site.

As we all know penalties and interest rapidly drive the debt up significantly, and interest continues to accrue while the arrears is being paid off.

There maybe other options, best determined by a specialist who knows how this all works out and will review your entire situation and make a proposal to you to resolve this matter. I would advise you to consult with such practitioners as there may be a better strategy for you. Interestingly, the service tends to strongly recommend to delinquent tax payers not to hire such representatives…hmmmm I wonder why?

We would be delighted to review your situation and recommend  some alternative options which may work for you, should you decide that paying it all and doing it yourself may not be the best plan available.

On your own, you get to pay it all, either through your business or through your own assets or earning power.

The 100% penalty, it is called.

I await your call. 413-549-2966