Corporate & Payroll Tax

Employer Tax Obligations

Every employer has three fundamental payroll tax duties: reporting employee wages and tax withholdings, collecting the appropriate amounts from employee paychecks, and depositing those funds with the IRS on a prescribed schedule. These obligations include federal income tax withholding, the employee’s share of Social Security and Medicare taxes (FICA), and the employer’s matching FICA contribution.

The IRS treats payroll tax obligations with particular severity because the withheld amounts are considered trust fund taxes — money that belongs to the employees and is held in trust by the employer for remittance to the government. When an employer fails to deposit these funds, the IRS views it as a misappropriation of employee funds, not merely a business debt.

Payroll Tax Delinquencies

Payroll tax delinquencies often begin when a business experiences cash flow problems and the owner uses withheld payroll taxes to cover operating expenses — rent, inventory, vendor payments — with the intention of catching up later. What starts as a single missed deposit can quickly escalate into multiple quarters of unpaid payroll taxes, with penalties and interest compounding rapidly.

The IRS assigns dedicated Revenue Officers to payroll tax cases, and these officers have broad enforcement authority. They can levy business bank accounts, seize business assets, and shut down operations. The IRS will also investigate whether the delinquency is ongoing — and if current quarter deposits are not being made, the prospect of resolution becomes significantly more difficult.

Trust Fund Recovery Penalty

The Trust Fund Recovery Penalty is one of the most consequential penalties in the Internal Revenue Code. It allows the IRS to assess a penalty equal to 100% of the unpaid trust fund taxes against any individual who is deemed a responsible person and who willfully failed to collect, account for, or deposit the employment taxes. This means the personal assets of business owners, officers, and in some cases managers and bookkeepers can be pursued.

The IRS determines responsible person status through interviews and review of corporate documents, bank signature cards, and operational authority. A person does not need to be an owner to be held personally liable — anyone with the authority to direct payment of creditors can be designated a responsible person. We represent individuals facing TFRP assessments and challenge both the determination of responsibility and the element of willfulness.

Resolving Corporate Tax Liabilities

Beyond payroll taxes, businesses face a range of tax obligations including corporate income tax, excise taxes, and information reporting requirements. When a business falls behind on multiple types of taxes, the resolution strategy must be coordinated to address all outstanding liabilities in a manner that preserves the viability of the business.

We work with business owners to bring their companies into full compliance, negotiate installment agreements or offers in compromise for business tax debts, and develop systems to prevent future delinquencies. For businesses that are no longer operating, we assist with the proper closure of tax accounts and resolution of outstanding liabilities, including defending former owners against personal liability assessments.

Challenging Responsible Person Determinations

When the IRS proposes a Trust Fund Recovery Penalty, the targeted individual receives a Letter 1153 and has 60 days to appeal the proposed assessment. This appeal is a critical opportunity to challenge the IRS’s determination — and it is often the most effective point at which to present evidence that the individual was not a responsible person or did not act willfully.

Willfulness in the context of payroll taxes does not require intent to defraud. The IRS defines it as a voluntary, conscious, and intentional act of paying other creditors instead of remitting trust fund taxes. However, there are defenses available — including demonstrating that the individual did not have actual authority over financial decisions, that they were unaware of the delinquency, or that they took reasonable steps to ensure compliance once they became aware.