What Are Payroll Taxes and Trust Fund Taxes?
Withheld payroll taxes are frequently referred to as “trust fund taxes” because the employer holds employees’ money in a trust until a federal tax deposit is made. When your business fails to withhold the appropriate amount of taxes, you can be penalized regardless of the form of your business entity. If the amount of taxes you owe exceeds $100,000, the IRS may assign a
Revenue Officer to your case.
For the trust fund recovery penalty to apply, your business must meet two conditions:
- Responsible person: The IRS defines a “responsible person” as one who “has the statutorily imposed duty to make the tax payment” for an organization.
- Willful failure: The IRS defines “willful failure” as a conscious, voluntary, and intentional failure to pay taxes.
When you partner with CitoTax, we’ll help you reach a reasonable agreement with your Internal Revenue Officer and get your delinquent taxes sorted out in the shortest time possible. We specialize in designing action plans for businesses no matter your budget or the complexity of your case.
Payroll Tax Representation and Help for Businesses
All employers are required to withhold and match certain taxes from their employees’ paychecks or wages and are required to send them to the IRS. Payroll taxes are withheld on behalf of your employees and then remitted to local, state, and federal authorities. Payroll taxes include the following:
- FICA: Comprised of Social Security and Medicare taxes and are paid by both employers and employees. As the employer, you must pay 6.2% for social security and 1.45% for Medicare, and you remit the same percentage from your employees. Within FICA, the Social Security portion of your taxes is referred to as OASDI, or Old Age, Survivors, and Disability Insurance.
- FUTA: Federal unemployment tax paid exclusively by employers. FUTA covers unemployment insurance and costs a total of 6.0% overall, but most states have a 5.4% credit that reduces the amount employers pay to 0.6%.
Employers are also required to file certain payroll tax forms with the IRS, such as a Form 941, Employer’s Quarterly Federal Tax Return, and a Form 940, Employer’s Annual Federal Unemployment (or FUTA) Tax Return.
When employers fail to file these tax returns and pay money for the taxes due, the Internal Revenue Service won’t be shy about getting the money. If a business owes back payroll taxes, they will most likely have a local Revenue Officer assigned to investigate the business and the officers of the business, take an inventory of the business assets, complete a trust fund interview to determine personal responsibility attributed to officers, and make a determination if the assets of the business should be seized, or if the business should be shut down. Revenue Officers can take very aggressive tactics and often contact the customers of a business to issue notices of levy that the business owes taxes.
Who Are IRS Revenue Officers?
IRS Revenue Officers are deployed when you or your business have enough unpaid taxes to warrant collections from the IRS. IRS Revenue Officers are motivated and judged on two main factors — how much money they can collect toward the satisfaction of the tax liability and how fast they can close a case. The IRS Revenue Officer assigned to you will thoroughly audit your business and ensure that there’s no disconnect between the taxes you’ve filed and the taxes you owe.
While Revenue Officers may show up at your place of business or home, they have no power to arrest you. Each Revenue Officer carries a plastic ID card, and those with a badge may be from the Criminal Investigation Department. Revenue Officers are actually completely separate from the Bureau of Revenue Agents, and they each work for different sectors of the IRS.
IRS Revenue Officer Assistance
The most important factor when dealing with an IRS Revenue Officer is to be well represented. By establishing a respectful and amicable relationship with your IRS Revenue Officer, you can make the ordeal easier for both of you. By partnering with the experts at CitoTax and being proactive, you can make dealing with an IRS Revenue Officer easier.
To increase the likelihood of a positive outcome, keep the following tips in mind when working with a Revenue Officer:
Get Your Materials Ready as Soon as Possible
Your IRS Revenue Officer’s performance is judged on how much money they can collect toward the satisfaction of the liability and how fast they can perform a case. Working with CitoTax, can quickly get your documentation in order and make the entire process faster.
Make a Good First Impression
There’s no better way to set the tone with your IRS Revenue Officer than by making a good first impression. Always try to be amicable with your Revenue Officer and do not ignore their requests.
Although you should strive to be accommodating, you should still work with a tax lawyer who knows your rights and can fight back against your Revenue Officer if necessary. We can help you devise a strategy for addressing all outstanding tax returns and give you and the officer an accurate timeline.
Strictly Follow Your Deadlines
By working with us, you can set up reasonable deadlines that present a compromise between your and your IRS Revenue Officer’s interests. This helps your business stay in control of the situation. When you’re turning in your documents and payments, our Experts will help ensure that your documents are clearly labeled, timely and well-organized.
Follow up on Your Case
Following up on your IRS case will show your Revenue Officers that you’re proactive and willing to work with them to ensure your auditing goes as smoothly as possible. CitoTax can help you keep a healthy open line with your Revenue Officer and politely follow up with the IRS. We can also help you reach out to the Revenue Officer’s manager when an officer is out of line and requires reprehension.