If you happen to be a business owner, when it comes down to the IRS, they really do not take any prisoners, which is why you should stay on their good side. In particular, it’s worth noting that if you are responsible for collecting the payroll taxes from your employees, you simply must ensure that you submit any withheld funds you may have, to the IRS. If you were to do a little research, you would find that, in regards to federal tax regulations, as an employer, you must ensure that you deposit any withholding amounts of employee payroll tax. If however, you make the mistake that other business owners have been known to make in the past, and fail to pay, you will face the consequences. Business owners that fail to pay this amount will be forced to pay what is known as a TFRP, also known as a Trust Fund Recovery Penalty. If you’re not sure what this penalty is, it is well worth actually taking the time to bring yourself up to speed, which is where we come into the picture. Below we’ll be providing you with a detailed look at the TFRP and will be telling you what you need to know.
What is the Trust Fund Recovery Penalty? – As you will no doubt be aware, as a business owner it is your responsibility to ensure that you pay your employees their wages. However, as the business owner it is also your responsibility to deduct tax payments from their wages. Businesses are required, by law, to deduct these payments from their employee’s pay checks. In total, 7.65% must be deducted, by you, the business owner, from their pay checks to cover any withholding federal income tax, medicare expenses, and Social Security. Put very simply, the TFRP is the amount of taxes deducted from employee wages by the business owner, that were deducted but NOT paid to the IRS. For some business owners it can be tricky dealing with taxes and numbers, which is why professional tax services are so useful. When hiring tax professionals, they basically take care of your taxes for you, meaning that you can avoid dealing with issues such as the Trust Fund Recovery Penalty. The penalty gets its name because you are holding these taxes for the government, in trust. The IRS will determine how much you, the business owner, owes them, and from here you will be sent a letter from the IRS, which will state their intention of basically pursuing you for unpaid employee taxes. You can appeal, and if you wish to do so, you have 60 days after receiving the letter. The IRS will then assess what you owe via what is known as a Notice and Demand for Payment. Here they have the power to collect the total amount owed, in a variety of ways. They can:
Demand payment in full
Levy your bank account
Invoke a federal tax lien
Claim personal and business assets to cover the expenses
How to avoid the TFRP – As you can see from the above, the TFRP is certainly not a nice thing to have to face, which is why you need to ensure that you do everything in your power to avoid facing a Trust Fund Recovery Penalty. As you know, the IRS does not mess around when it comes to taxes, or in this case, unpaid taxes. Burying your head in the sand and hoping the problem will go away is simply not an option. In the case of TFRPs, prevention is by far the best cure, which is why we’ll now be looking at what you can do to avoid facing Trust Fund Recovery Penalties. Take a look at the following helpful tips and see how many you can start implementing into your business:
Always be honest – Honesty is always the best policy in life, but this is especially true when dealing with the IRS. The IRS are incredibly tenacious and will always see right through a lie. You cannot deceive the IRS, so it is best to not even try. Always be honest and provide them with whatever payments and figures they may require. If you have withheld payments from them, be honest, explain what happened, and show them that you are sincere. You’ll be amazed by what a difference this will make.
Understand the Statute of Limitations – When it comes to the IRS, knowledge is power. According to the Statute of Limitations for the TFRP, it is down to the IRS to notify you of any payments owed to them within three years. Any longer than three years and you will basically be in the clear. Now, the chances of a business owing the IRS money and them forgetting to notify this business, or failing to identify that they are owed money are incredibly slim indeed, but you never know.
Hire professional tax services – As a business owner, dealing with taxes can be a real headache, which is why people choose to hire professional tax services and let experts handle their taxes instead. This is very useful because it means you get more free time and have far less stress. It also means that taxes are handled correctly. Basically, they do all of the work for you, and you reap the rewards. Hiring pro tax services is not free obviously, but for business owners it is money well spent.
Contact us today at 1-877-78-TAXES [1-877-788-2937] for a free confidential evaluation.