The Internal Revenue Code requires every employer to withhold Social Security taxes, Medicare taxes, and income taxes from the wages of its employees. The portion of Social Security and Medicare taxes withheld from the employees’ wages, along with an additional contribution of Social Security tax made by the employer, are commonly referred to as "Payroll Taxes" or "Employment Taxes." The combination of Payroll Taxes actually withheld from an employee's wages (net of the employer's contribution), plus the income taxes that are actually withheld from an employee's wages, are collectively referred to as "Withholding Taxes" or "Trust Fund Taxes." The term Trust Fund Taxes is used because these taxes are theoretically held in trust by the employer until paid over to the IRS in the manner described below.
Under the Internal Revenue Code, an employer is required to collect, account for and pay over taxes that are withheld from employees’ wages. These Withholding or Trust Fund Taxes, along with the employer’s share of Social Security tax, are supposed to be deposited in a qualified bank or financial institution for transfer to the IRS. Along with the payment of its Payroll and Withholding Tax obligations, the employer is required to file an Employer’s Quarterly Federal Tax Return, commonly referred to as a "941 Return," and an Employer’s Annual Federal Unemployment (FUTA) Tax Return, commonly referred to as a "940 Return." The same Payroll and Withholding Tax and return filing requirements apply to all active employers, whether operating as a corporation, limited liability company, partnership or sole proprietorship.
The IRS considers the failure to properly withhold and pay over Withholding and Payroll Taxes a serious violation of the Internal Revenue Code. If a business fails to timely pay its Withholding and Payroll Tax obligation, the IRS is authorized to forcibly collect the tax due, plus substantial penalties and accrued interest. The IRS employs Revenue Officers that specialize in the collection of these liabilities. These Revenue Officers aggressively pursue collection of unpaid Payroll Taxes from the business, and often from the company's officers, directors, owners and other responsible individuals. On the business level, if the Revenue Officer is unable to collect the delinquent payroll tax, the Revenue Officer will often seek to close the business and liquidate its assets. In certain cases, the IRS will criminally prosecute responsible individuals that willfully fail to file payroll tax returns or pay the payroll tax liabilities of an employer.
The attorneys at Carr Law Firm have substantial experience representing employers and their officers and owners in Payroll Tax cases. Our attorneys work with the IRS to negotiate a payment plan, an offer in compromise, or other solution to the problem. Our firm is also experienced in defending business entities against forcible collection action initiated by IRS Revenue Officers as well as other related payroll tax problems. The attorneys at Carr Law work tirelessly to keep your business operating and to solve your payroll tax liability. We help you understand your payroll tax obligations, help you solve your existing problem, and help you meet your future Payroll Tax reporting and payment requirements.
Payroll Tax Resolution