Is IRS Enforcement of Small Business Delinquent
Payroll Tax Problems Treasonous?
Michael Rozbruch, CPA, CTRS
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The way the IRS treats small business delinquent payroll tax problems is almost treasonous.
Find out how you can solve your IRS payroll tax problems before the IRS puts a payroll tax levy
(or worse) on your small business.
How the IRS strong-arms small business delinquent payroll taxes is almost treasonous. They can
even go after you personally for payroll tax debts of a business. Every day it enrages me that
about a third of my tax relief clients are small businesses with payroll tax problems. Small firms
are vital to this country. According to the Small Business Administration, small businesses:
Represent 99.7 percent of employer firms.
Employ about half of all private sector employees.
Pay nearly 45 percent of total U.S. private payroll.
Have generated 60 to 80 percent of net new jobs annually over the last decade.
Create more than half of nonfarm private gross domestic product (GDP).
Hire 40 percent of high tech workers (such as scientists, engineers and computer
Are 52 percent home-based and two percent franchises.
Made up 97.3 percent of all identified exporters and produced 28.9 percent of the known
export value in FY 2006.
Produce 13 times more patents per employee than large patenting firms; these patents are
twice as likely as large firm patents to be among the one percent most cited.
Despite small businesses' importance to America, if the IRS thinks your small business owes
delinquent payroll taxes, you are guilty until proven innocent. When it comes to payroll tax debt,
the IRS has unyielding power and authority to collect. They have the power to padlock your
front doors, putting you out of business, without obtaining a court order. There are lots of people
in this economy starting new businesses. And there are a lot of small businesses with IRS
problems who fall behind on their payroll taxes (using this money to keep the lights on instead of
making payroll tax deposits).
Just when you thought the small business tax problem was bad, here's even more horrific tax
news. Uncle Sam is gunning for small businesses with delinquent payroll tax problems. Because
small businesses are the largest contributors to the annual tax gap, the IRS is cracking down on
them! Check out my recent article about how the New Economic Stimulus Plan Calls for
Heightened IRS Enforcement. If you're a small business with delinquent payroll tax problems,
today it is even more mission critical to fix those payroll tax problems fast.
Since payroll tax penalties can be the kiss of death to many small businesses, the best way to
dodge delinquent payroll tax penalties is by avoiding payroll tax problems in the first place.
When your business is starving, dipping into the payroll tax cookie jar may be too tempting to
resist. Save your business from yourself.
Here are a few small business payroll tax tips to stop delinquent payroll tax problems before they
Plan ahead: Budget at least 10% of an employee's annual salary for payroll taxes (Check
with your accounting professional to make sure that number is high enough for your
Use a service to handle the payroll so you won't be tempted to dip into the payroll tax
Use Electronic Federal Tax Payment System or EFTPS to automatically send payments.
The computer won't "forget" to send your payroll taxes.
Look at your head count. Perhaps you can use independent contractors instead of
employees. Check out the IRS web site for Independent Contractor (Self-Employed) or
Employee test to see if this payroll tax slashing tip works for your small business.
File your payroll tax returns on time, even if you don't have the money. If you can't afford
to pay these taxes, you can still file your return on time and save huge failure to file
penalties right off the bat. However, you will still incur substantial penalties for failure to
deposit (payroll taxes on time) and failure to pay.
But say you're already in trouble with the IRS for delinquent payroll taxes, what do you do next?
Don't panic. Just keep in mind that there's a solution to every payroll tax problem. Whether you
owe $15,000 or $2 million in payroll tax debt, you can find a way out. There is a solution to
every problem. You may be eligible to settle the debt for a fraction of what’s owed, but you
have to consult an expert tax attorney or CPA who happens to be a Certified Tax Resolution
The key is contacting a tax resolution professional as soon as you can. A consultation with a
good tax attorney or tax resolution specialist can turn your delinquent payroll tax nightmare into
a distant memory so you can go back to the business of your small business, creating the