Business Owners Face Stricter IRS Payroll Tax Debt Collections

Business Owners Face Stricter IRS Payroll Tax Debt Collections

Payroll taxes make up a large chunk of the federal government’s revenue. So, it makes sense that the IRS wants to do everything possible to ensure businesses pay any payroll tax debts. In fact, in 2022, the IRS upped collections enforcement on business owners with unpaid payroll taxes and increased the penalties for getting caught.

How Did the IRS Pursue Unpaid Payroll Taxes Before June 2022?

Before June 2022, the IRS pursued unpaid payroll taxes aggressively but gave business owners opportunities to correct the problem and avoid criminal prosecution. Typically, an IRS agent was assigned to the business and would review its tax paperwork. The agent would look for evidence that payroll taxes went unpaid. If they found evidence of noncompliance, they would notify the business owner and compel them to sign on to a correction plan.

This would result in the taxes getting paid, plus penalties and interest. However, the IRS usually did not dig too deeply into what the business owner actually did with the unpaid payroll tax money.

That all changed in June 2022, with major implications on what happens to business owners with unpaid payroll taxes.

What Changes Did the IRS Make to Payroll Tax Debt Collections in June 2022?

In June 2022, the IRS announced it would go further with its payroll tax debt collections. Essentially, the IRS will also check to see what the business owner or person responsible for paying the taxes did with the money. Significantly, if the IRS determines that the responsible party failed to pay payroll taxes because they used the money for personal gain, the party is likely to face not only civil penalties but also criminal charges.

How Will the IRS Determine If Unpaid Payroll Taxes Were Used for the Employer’s or Owner’s Benefit?

Once the IRS determines that a business or business owner failed to pay payroll taxes, it will investigate to determine where the money went.

To get this information, the IRS might look at bank statements and other financial records. The IRS wants to see if the business owner used the money for personal gain. If they did, the IRS might consider referring the matter for criminal charges.

Moreover, the IRS plans to check individual 1040 tax returns to see if the money was reported as income. If it was not reported, the party could face fraud or tax evasion charges for failing to disclose the money on their personal return.

Will the IRS Now Consider Criminal Charges for Intentional Failure to Pay?

Yes, the IRS will now consider criminal charges for intentional failure to pay payroll taxes. Especially if they determine that the responsible party or parties failed to pay the taxes because they were using the money for personal gain. In fact, charges are even more likely for parties who appropriated the money to their personal account but failed to report it on their tax return.

What Options Do Employers and Business Owners Have to Pay Off These Debts?

The business owner should contact the IRS and start making good-faith arrangements to pay off the payroll tax debt. Wiztax can help! Schedule a free call or call (866) 568-4593 to see how. Remember, the worst thing you can do here is to ignore the unpaid payroll taxes situation and hope it goes away! Our primary goal will be to review all tax relief services and resolution options that are available to you. We can then work on a path to resolution. We never charge for ‘investigations’ or consultations.

Read more:
“Payroll Tax Relief: Settle Payroll Tax Debt and 941 Issues”
“Payroll Tax Debt Trust Fund Recovery Penalty (TFRP)”

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