Category Archives: Tax Tips

Business Owner? Pitfalls of Not Paying Attention

Business owners wear many different hats and often times work long hours to ensure that they provide quality products and services for their clientele. Over the years, I have worked with many business owners that take considerable pride in their given trade. Whether I am working with an electrician, hair stylist, physician or daycare owner, there exists a certain level of experience and passion, a calling if you will, that leads one to start their own business. While applying a skill set in a particular trade is undoubtedly a vital aspect of running a successful business, the role of the business owner does not stop there.

Many small business (SMB) owners are forced to delegate duties and responsibilities to others as there are simply not enough hours in any given day to “do it all.” Delegation frees up more time to focus on strategic hands-on work, instead of worrying about small details. While effective, business owners must be cautious when delegating responsibilities relative to tax issues. It is not uncommon for a business owner to rely on a CPA to prepare tax returns, or a bookkeeper or payroll service to handle income statements and payroll tax deposits. Ultimately, however, a business owner must maintain accountability despite the fact that someone else is “handling” the taxes.   

The issue of accountability becomes paramount when dealing with tax liabilities in general, but particularly when that liability stems from unpaid withholding taxes. While it is clear that the IRS will attempt to collect unpaid withholding taxes from a business, many owners are surprised to learn that the IRS can also make assessments against willful and responsible parties under the provisions covering the Trust Fund Recovery Penalty. Regardless of whether or not a business owner is delegating the federal tax deposit responsibilities to others, in most cases the IRS will still find the owner responsible on a personal level.

Anyone that has dealt with IRS Collections has probably received numerous letters and notices regarding their liability. In fact, I would go so far as to say that IRS Collections can inundate taxpayers with notices over time. While no one wants to receive a letter from the IRS, it is imperative that business owners pay attention to each notice.  Often times these notices will include requests for a response or additional information, and may contain important deadlines. Failure to respond to a notice could result in audit, additional tax, interest and penalty assessment, or levies, garnishments and possibly seizure.

When it comes to tax issues, business owners must take an active role in reviewing tax returns, federal tax deposits, and notices on a consistent and on-going basis. Paying attention to the details may make the difference between working out a reasonable resolution or facing an insurmountable obstacle. When in doubt, it is essential to seek professional help. Contact us today, and we can help to answer any questions while simultaneously getting you and your business back on track.

“I’ve Got My Tax Liability Under Control”

Over the nearly 20 years that I have been in practice I can’t tell you how many times I spoke with taxpayers believing that they had their resolution under control by making voluntary payments.  These soon-to-be clients suffered from all too common misperception that these payments would in some way deflect attention from their case or cause it to be put to the bottom of the collection pile.

Unfortunately, they couldn’t be more wrong and it’s usually a levy or lien that brings about the realization.  Yes, of course, voluntary payments are important to paying unpaid taxes.  In fact, they are the first thing I recommend in nearly every case, especially employment tax cases.  But to think that voluntary payments alone will alter the course of one’s case can be a huge miscalculation.  State and IRS collections are done by system.  They’re not whimsical or based on good faith.  Until a tax liability is paid in full or a formal resolution, such as installment agreement, is agreed to the collection process moves forward exposing taxpayers to liens and levies.

Just recently, in fact, I encountered this very situation.  A taxpayer came to me at the end of last year irate about being levied by the IRS.  The company owes the IRS just over 100k in employment taxes but the owner of the company had been making voluntary payments of $2,000 per month.  He hadn’t spoken with the IRS but had noted less mail was coming since beginning the voluntary payments.  He was angry that the levy followed his very obvious effort at resolving the situation.  Unfortunately, this taxpayer had assumed that his payments had directly influenced the IRS’ lack of urgency with his case.

Immediately, I began my effort of educating the taxpayer about the collection process.  Most every state and definitely the IRS has a set protocol for collecting unpaid taxes.  The process begins with notification of a balance due, letters with an increasing demand for payment and ultimately assignment to a field personnel for collection.  Every collection case goes through this protocol until the liability is paid or a collection determination is made.  A collection determination means the state or IRS’ decision on how the liability will be resolved.  A tax practitioner’s goal is to mold and influence that collection determination within the rules to their clients’ best interests.

The point here is that making voluntary payments, while advisable, does not alter the collection process.  Short of full paying the liability proactive and consistent contact with the authorities is not just recommended but required in order to ensure that a client remains protected from enforcement action.

If you find yourself in this situation, it is now more important than ever to get in contact with us. We are always here to answer any questions that you might have about your particular situation. Make it a point to contact us today so that we can get your life back on track.

[Infographic] 7 Types of Installment Agreements

Installment Agreements (also known as Payment Plans) are the most accepted and common resolution strategy with the IRS. It takes experience, time and preparation to successfully negotiate an Installment Agreement and no negotiation goes exactly like the other.

We’ve created this simple guide to help illustrate the various types of Installment Agreements that may be available to you depending on your particular situation.  Take a few minutes to better familiarize yourself with their differences — and remember, we are always here to help.

7 Types of Installment Agreements

Learn more about ways we can help or feel free to contact us with any questions.

To download a high-resolution version of this infographic, please click here