Despite shrinking revenue, many businesses owners are choosing to keep valuable employees during the coronavirus shutdown. And with cash in short supply, it’s tempting to ‘defer payroll tax deposits to the IRS.
I assure you, going broke owing the IRS for payroll taxes is the worst mistake a business owner can make.
It’s time for a new game plan! Companies that are unable to make their required payroll tax deposits —and are out of borrowing power —have these choices:
- Downsize the staff to a level you can afford. This may mean going back to the owner being the only employee. But drastically cutting your overhead will allow you to get by while exploring other avenues.
- Close altogether.
- Or, take the biggest risk of all – keep things as they are, and hope things get better. This approach has led a lot of people to a decade of grief. They continue to pay payroll, but stop making their payroll deposits.
You might think that the payroll tax is a corporate liability and that you personally can walk away. Think again. The IRS can and will assess a penalty equal to the trust funds (taxes withheld from the employees) on anybody that they feel is responsible for not paying them. Every business owner with check-signing authority will most likely be considered a responsible person. Here is the disaster — you cannot get rid of this penalty by filing individual bankruptcy. The IRS is going to be after you for at least 10 years.
If your cash flow is not cutting it, options 1 and 2 are your best bet. Your life will probably recover in 2 to 5 years and you can mark it up to lessons learned. Failing at option 3 will greatly expand your suffering.
If you or someone you know has received a Notice of Intent to Levy or some other federal or state tax issue, please feel free to contact me at either (352) 317-5692 or email jim@taxrepgainesville.com .
