According to the Government Accountability Office (GAO) the Internal Revenue Service (IRS) hasn’t been doing a very good job collecting payroll taxes. Payroll taxes are amounts that employers withhold from employee wages for federal income taxes, Social Security, and Medicare (so called trust fund taxes) as well as the employer’s matching contributions. The willful failure to pay these payroll taxes is a violation of the criminal tax law, a felony punishable by up to 5 years in jail under Internal Revenue Code (IRC) Section 7602.
The GAO study found that over 1.6 million businesses owed over $58 billion dollars in uncollected payroll taxes. The GAO concluded that the IRS didn’t file tax liens quickly enough, and that it didn’t go after the owners of businesses for the trust fund recovery penalty (TFRP) fast enough. The report also suggested that the IRS wasn’t seizing business assets often enough, pointing out that there were only 667 seizures in fiscal 2007, down from over 10,000 in 1997. The report was a rather scathing indictment of the IRS, and various U.S. Senators were quick to jump on the “bash the IRS bandwagon.” Senator Norm Coleman called on the IRS to “ratchet up its efforts” to recover billions in unpaid payroll taxes, and to hold “tax cheats” accountable.
The IRS responded that among other efforts it is developing and testing streamlined procedures to file injunctions against business with repeat payroll tax problems, and shut them down quickly. Apparently this would include employers whose principals were previously assessed a trust fund recovery penalty, as well as those who have operated multiple entities with payroll tax problems.
If your business has payroll tax problems you are at risk of the IRS putting you out of business, and assessing the trust fund recovery penalty resulting in owners, and officers having substantial personal tax liability. If you would like assistance in dealing with these, and other types of tax problems contact the Los Angeles California tax attorneys at Brager Tax Law Group, A P.C.