How to deal with owing payroll tax liability

Like most unpaid tax problems in business, the IRS treats payroll tax liability seriously and won’t relent once it begins pursuing you for business. It will take every opportunity it can to collect your back taxes, engaging in hostile legal actions that can ultimately cost you your business and your livelihood (depending upon your liability). Often, when the IRS spots issues with payroll tax deposits, the agency reaches out with Letter 5857.

Failing to pay your payroll taxes can eventually mean owing overly burdensome fines and even prison time – would you take the risk? Most people wouldn’t, which is why paying off your business’ tax liability should be among your most important concerns right now. That’s true whether you filed and didn’t pay, or you owe tax due to changes made to your return during a payroll tax audit. Let’s tax a look at some of the things you should be doing to address this problem.

Start dealing with your Payroll Tax Liability yesterday

You read that right: start dealing with this yesterday. What we’re trying to say here is that it’s never too soon or too late to begin working on dealing with payroll tax liability.

For the reasons we just described, you’ll want to start working on solutions to protect yourself and your business immediately. There’s never a better time to start than right now, and within 24 hours you’ll feel better that you started yesterday.

Get current on past years’ tax returns

Even if you don’t currently have money to pay your tax liability for years past, you should make sure you get current on any unfiled tax returns. Begin with the most recent return currently due (such as this year’s) and go back in chronological order to file whatever returns are outstanding.

If you have money to put toward your tax bills, pay down the most current return first to show the IRS that you’re making a serious effort to catch up with the other payroll back taxes you owe. This demonstration of good faith could afford you some capital (strictly figuratively speaking!) down the line should you need to ask the IRS for forms of tax debt relief, such as an offer in compromise or installment agreement.

Don’t deal with the IRS yourself – get a tax relief attorney!

You’ve heard it all before: The IRS isn’t your friend. It also aren’t interested in doing you favors unless it believes the cost of coming after you otherwise will outweigh what it would get now by striking a deal. Besides, if you try to handle the IRS yourself on a sensitive matter like this, you run the risk of making your situation worse.

When it comes to interfacing with the IRS at any point in the process of paying your outstanding payroll taxes, get a tax relief attorney to walk you through the process and deal with the IRS for you. This professional’s bread and butter is based on calling IRS agents for clients like you and applying their knowledge of the U.S. tax code to help your situation while minimizing the risk of exposing you to other liabilities you may not have otherwise foreseen.

Get current with your payroll tax deposits

Do everything you can to make your current payroll tax deposits and do so before you try to begin negotiation with the IRS. As we said before with trying to pay down as much of your most recent debt as possible, making an effort to stay current with your deposits can earn you some brownie points before you begin negotiating with the IRS. And by brownie points, we mean signs of good faith that you can be trusted to afford an offer in compromise, installment plan, or another form of IRS tax debt relief.

It will also help you avoid sinking deeper into payroll tax debt, making you feel like the steps you’re taking now will ultimately be futile. But no matter what you do to try resolving any tax debt, it’s never wasted time or opportunity!

File Form 433-B & prepare your documentation

Your tax relief attorney should walk you through IRS Form 433-B and the preparation of financial documentation to prepare you for negotiating your debt relief with the IRS.

Form 433-B will ask for details about your business such as its income, assets, expenses, and debts. You’ll need to back all of this up with documentation that includes bank statements, profit and loss reports, copies of your company’s bills, recent payroll reports, and proof of federal tax deposits.

All of this combined will help the IRS determine what your company makes and how much it can afford to pay toward its payroll back taxes month-to-month.

Write a request for an Installment Agreement or Offer in Compromise

An installment agreement or an offer in compromise are two ways business owners can work toward resolving their unpaid payroll tax debt. In an installment agreement, you’ll be asking the IRS to agree to a payment plan to pay off your owed taxes over time. An offer in compromise would be an offer to pay the IRS a considerable lump sum that’s less than your overall tax liability and have the rest forgiven.

Talk to your attorney about either or these or other payroll tax debt relief options that might apply to your situation and let them handle it for you.

Do you need help from a tax attorney?

If you need legal assistance when it comes to dealing with outstanding payroll tax liabilities, turn to Damiens Law Firm, PLLC for help. We support individuals and businesses with a variety of tax law services, including relief, and we’re prepared to help you.