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Strategy Guide

Strategy Guide For Back Payroll Taxes

Step-by-Step Approach to Managing Delinquent Payroll Tax Problems:

  • What is the reason for falling behind with on payroll taxes?
  • What actions must be taken in the very near future?
  • What plan is in place to assure compliance and resolution long term?

What Caused The Delinquency?

Most common reasons for payroll tax debt:

  • Economic Downturn
  • Diversion of tax deposits to pay other business expenses
  • Diversion of tax deposits to pay personal expenses
  • Extended Absence of Owner or Manager
  • Delay in collecting account receivables
  • Business expands too rapidly for cash flow
  • Theft of funds by employees or other parties
  • Owner lacks financial or legal expertise

What to do ASAP?

In the short term the business must take the following step towards employment tax resolution:

  • Initiate withholding and tax deposits for the current tax period
  • Make sure all current tax returns and deposits are made when due
  • Retain a payroll service (like ADP or Paychex)
  • Figure out if the business can make money even while paying payroll taxes
  • Consider a reduction in work force or wage expense
  • Use independent contractors instead of employees (make sure contractors qualify for 1099 status)
  • Pay off Trust Fund Portion to minimize personal liability

Long Term Resolution Plan

Ongoing payroll tax compliance will need to be assured.  The IRS Agent in charge of your case may request proof of tax deposits and filings every period, or more frequently.  The business will also need to comply with all other tax obligations, like future income tax filings and payments

Once ongoing compliance is in place, the business will need a resolution strategy for managing the tax debt.  Based on the specific circumstances of your case the following options may resolve the tax problem:

  • Short or Long Term Payment Plan
  • Tax Debt Settlement
  • Temporary Hardship Collection Hold

Related Topic: Payroll Taxes