Collection of Employment Taxes – Info for Employers (Part IV):
Trust Fund Recovery Penalty
The Trust Fund Recovery Penalty is a penalty that is assessed personally against the individual or individuals who were responsible for paying the trust fund taxes, but who willfully did not do so. The amount of the penalty is equal to the amount of the unpaid trust fund taxes. For additional information, please see Notice 784, Could You be Personally Liable for Certain Unpaid Federal Taxes? or visit www.irs.gov/TFRP.
If the Trust Fund Recovery Penalty is proposed against you, you’ll receive a Letter 1153 and Form 2751, Proposed Assessment of Trust Fund Recovery Penalty.
If you agree with the penalty, sign and return Form 2751 within 60 days from the date of the letter. To avoid the assessment of the Trust Fund Recovery Penalty, you may also pay the trust fund taxes personally.
If you disagree with the penalty, you have 10 days from the date of the letter to let the IRS know that you don’t agree with the proposed assessment, have additional information to support your case, or want to try to resolve the matter informally. If you can’t resolve the disagreement with them, you have 60 days from the date of the Letter 1153 to appeal with the Office of Appeals. For more information, see Publication 5, Your Appeal Rights and How to Prepare a Protest if You Don’t Agree.
If you don’t respond to the letter, the IRS will assess the penalty amount against you personally and begin the collection process to collect it. They may assess this penalty against a responsible person regardless of whether the company is still in business.
Next week: Past due tax returns
(IRS Publication 594 and IRS.gov) (TTT 11/12/19)
Collection of Employment Taxes – Info for Employers (Part III):
What are trust fund taxes?
Trust fund taxes are the income tax, Social Security tax, and Medicare tax (trust fund taxes) withheld from the employee’s wages. They are called trust fund taxes because the employer holds these funds “in trust” for the government until it submits them in a federal tax deposit.
Certain excise taxes are also considered trust fund taxes because they are collected and held in trust for the government until submitted in a federal tax deposit. For more information, see Publication 510, Excise Taxes.
To encourage prompt payment of withheld employment taxes and collected excise taxes, Congress has passed a law that provides for the Trust Fund Recovery Penalty.
For more information on employment taxes or trust fund taxes, see Publication 15, Circular E, Employer’s Tax Guide.
Next week: Information on the Trust Fund Recovery Penalty
(IRS Publication 594 and IRS.gov) (TTT 11/05/19)
Collection of Employment Taxes – Info for Employers (Part II):
What the IRS will do if you do not pay your employment taxes:
- The IRS will assess a failure to deposit penalty, up to 15% of the amount not deposited in a timely manner.
- The IRS may file a Notice of Federal Tax Lien and/or take levy action
- The IRS may propose a Trust Fund Recovery Penalty assessment against the individuals responsible for failing to pay the trust fund taxes.
- The IRS may refer this matter to the Department of Justice for civil collection or criminal prosecution for failure to adhere to the reporting and payment requirements mandated by the Internal Revenue Code.
Next week: What are trust fund taxes?
(IRS Publication 594 and IRS.gov) (TTT 10/29/19)
Collection of Employment Taxes – Info for Employers (Part I):
What are employment taxes?
Employment taxes are the amount you must withhold from your employees for their income tax and Social Security/Medicare tax (trust fund taxes) plus the amount of Social Security/Medicare tax you pay for each employee. Federal unemployment taxes are also considered employment taxes.
Employment taxes are incurred at the time you pay wages and generally paid in semi-weekly or monthly deposits. You must use electronic funds transfer to make all federal tax deposits, generally through the Electronic Federal Tax Payment System (EFTPS). See Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started.
Next week: What the IRS will do if you do not pay your employment taxes.
(IRS Publication 594 and IRS.gov) (TTT 10/22/19)
Information for Taxpayers assigned to a Private Collection Agency
Alert: Your delinquent account could be assigned to a Private Collection Agency.
The Internal Revenue Service (IRS) will notify you of the assignment before the Private Collection Agency contacts you and will send you Publication 4518, What You Can Expect When the IRS Assigns You to a Private Collection Agency.
The notice from the IRS will contain the name of the Private Collection Agency they assigned your account to, along with the Private Collection Agency’s address and phone number.
To protect your privacy, the notice will also provide you with a unique ten-digit Taxpayer Authentication Number. Be sure to save the number. The Private Collection Agency will only work with you on your delinquent accounts after authenticating your identity using your Taxpayer Authentication Number.
The IRS contracts with Private Collection Agencies requires that they provide you with quality service and equitable treatment. For more information about the private debt collection program, visit www.irs.gov/businesses/small-businesses-self-employed/private-debt-collection.
(IRS Publication 594 and IRS.gov) (TTT 10/15/19)
How long does the Internal Revenue Service (IRS) have to collect my taxes due?
The IRS can attempt to collect your taxes up to 10 years from the date they were assessed. However, there are ways this time period can be suspended. For example, by law, the time to collect may be suspended while:
· The IRS considers your request for an Installment Agreement or Offer in Compromise. If your request is rejected, they will suspend collection for another 30 days, and during any period the Appeals Office is considering your appeal request.
· You live outside the U.S. continuously for at least 6 months. Collection is suspended while you’re outside the U.S.
· The tax periods the IRS is collecting on are included in a bankruptcy with an automatic stay. They will suspend collection for the time period they can’t collect because of the automatic stay, plus 6 months.
· You request a Collection Due Process hearing. Collection will be suspended from the date of your request until a Notice of Determination is issued or the Tax Court’s decision is final.
· The IRS is considering your request for Innocent Spouse Relief. Collection will be suspended from the date of your request until 90 days after a Notice of Determination is issued, or if you file a timely petition to the Tax Court, until 60 days after the Tax Court’s final decision. If you appeal the Tax Court’s decision to a U.S. Court of Appeals, the collection period will begin 60 days after the appeal is filed, unless a bond is posted.
Next week – Information on collection cases assigned to a Private Collection Agency.
(IRS Publication 594 and IRS.gov) (TTT 10/08/19)
How to pay your taxes – if you can’t pay in full: But I am unable to pay at this time:
If you are unable to pay at this time –
Ask the IRS to delay collection and report your account as currently not collectable.
If you can’t pay any of the amount due because payment would prevent you from meeting basic living expenses, you can request that the IRS delay collection until you’re able to pay.
Prior to approving your request, the IRS may ask you to complete a Collection Information Statement and provide proof of your financial status. The form may be Form 433F.
Alerts: remember that even if they delay collection, the IRS will still charge applicable penalties and interest until you pay the full amount. The IRS may file a Notice of Federal Tax Lien. They may also request updated financial information during this temporary delay to review your ability to pay. This has been averaging every two years but may vary.
Next week – How long can the IRS collect taxes….
(IRS Publication 594 and IRS.gov) (TTT 10/01/19)
How to pay your taxes – if you can’t pay in full: Offer in Compromise (Part II)
Before the IRS can consider your offer:
· you must file all tax returns you are legally required to file,
· make all required estimated tax payments for the current year, and
· make all required federal tax deposits for the current quarter.
The IRS cannot consider your offer if you are in bankruptcy or and generally if you are currently undergoing an audit.
Use the Offer in Compromise Pre-Qualifier on the IRS web site to explore the possibility that the Offer in Compromise program may be a realistic option to resolve your balance due.
To apply for an Offer in Compromise, complete one of the following forms:
Form 656-L, Offer in Compromise (Doubt as to Liability) Complete this if there is a genuine dispute as to the existence or amount of the correct taxt debt under the law.
Form 656, Offer in Compromise Complete this if you’re unable to pay the amount due, or have an economic hardship, or have another special circumstance that would cause paying the amount due to be unjust.
For more information, see Form 656-B, Offer in Compromise Booklet or visit www.irs.gov/Individuals/Offer-in-Compromise-1.
Next week – Another option – unable to pay at this time.
(IRS Publication 594 and IRS.gov) (TTT 09/24/19)
How to pay your taxes – if you can’t pay in full: Offer in Compromise (Part I)
You may be eligible for an Offer in Compromise if you can’t pay the amount you owe in full or through an IRS installment agreement.
By requesting an Offer in Compromise, you are asking to settle unpaid taxes for less than the full amount you owe.
The IRS may accept an Offer in Compromise if:
· They agree that your tax debt may not be accurate,
· You have insufficient assets and income to pay the amount due, or
· Because of your exceptional circumstances, paying the amount due would cause an economic hardship or would be unjust.
For an Offer in Compromise to be considered, you must pay an application fee and make an initial or periodic payment for all Form 656 submissions. However, low income taxpayers may qualify for a waiver of the application fee and initial or periodic payment.
For more information, please see the Low-Income Certification form found in Form 656-B, Offer in Compromise Booklet.
Next week – Additional IRS Offer in Compromise information
(IRS Publication 594 and IRS.gov) (TTT 09/17/19)
How to pay your taxes – if you can’t pay in full: Installment Agreement (Part III)
To be eligible for an Installment Agreement, you must file all required tax returns.
Prior to approving your Installment Agreement request, the IRS may ask you to complete a Collection Information Statement (Form 433F, 433-A and/or Form 433-B) and provide proof of your financial status. If you apply over the phone or at an IRS office, have your financial information available. Bring documentation to support your dollar amounts on the form. For more information, see Publication 1854, How to Complete a Collection Information Statement (Form 433-A).
If they approve your request, they will still charge applicable interest and penalties until you pay the balance due in full and may file a Notice of Federal Tax Lien.
If the IRS rejects your Installment Agreement request, you may request that the Office of Appeals review your case. For more information, see Publication 1660, Collection Appeal Rights.
If you’re unable to meet the terms of your approved Installment Agreement, contact the IRS immediately.
Next week – If you can’t pay in full – apply for an Offer in Compromise
(IRS Publication 594 and IRS.gov) (TTT 09/10/19)