July 21, 2011

Important Payroll Tax Information For Employers

Employment taxes for California business owners located in the county of Los Angeles, Orange, Santa Barbara, Ventura and San Diego consist of two separate parts:

• The amounts an employer should withhold from employees for income, social security, and Medicare taxes (also called withheld or trust fund taxes), plus
• The amount of social security tax and Medicare taxes an employer pays on behalf of each employee

The Trust Fund Recovery Penalty (TFRP) may be assessed against any person who:

• is responsible for collecting or paying withheld income and employment taxes, or for paying collected excise taxes, and
• willfully fails to collect or pay them.

A responsible person is a person or group of people who has the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes. This person may be:

• an officer or an employee of a corporation,
• a member or employee of a partnership,
• a corporate director or shareholder,
• a member of a board of trustees of a nonprofit organization,
• another person with authority and control over funds to direct their disbursement, or
• another corporation.

For willfulness to exist, the responsible person:

• must have been, or should have been, aware of the outstanding taxes and
• either intentionally disregarded the law or was plainly indifferent to its requirements (no evil intent or bad motive is required).

Using available funds to pay other creditors when the business is unable to pay the employment taxes is an indication of willfulness.

Paying employment taxes late, or not including payment with a return if required, could result in additional penalties and interest on any unpaid balance. Failure to Deposit (FTD) penalties of up to 15 percent of the amount not deposited may be charged, depending on how many days the payment is late.

Unpaid employment taxes could cause additional collection action to be taken. IRS could require an employer to:

• File and pay employment taxes monthly, rather than quarterly, or
• Open a special bank account for the withheld amounts, under penalty of prosecution.

Enrolling in and making current tax deposits through the Electronic Federal Tax Payment System (EFTPS) can help employers stay up-to-date with their payment requirements.

Need tax help now? Call Mitchell A. Port at 310.559.5259.

July 11, 2011

Taxpayer Advocate

The National Taxpayer Advocate submitted its mid-year report to congress a couple of weeks ago. The report identifies priority challenges and issues for upcoming year. The entire report can be seen at this link.

The National Taxpayer Advocate has expressed concern about IRS collection practices in prior reports and has, in particular, made recommendations to reduce the harm that unproductive liens can inflict on taxpayers. The report expresses continuing concern about the IRS’s practice of automatically filing tax liens based on a dollar threshold instead of basing lien-filing decisions on an analysis of the taxpayer’s financial situation. In cases where the IRS has determined a taxpayer is suffering an economic hardship or possesses no significant assets, the filing of a lien is unlikely to further tax collection but will further damage a taxpayer’s credit rating, thus harming the taxpayer, increasing the taxpayer’s cost of living, and reducing the chance the taxpayer will be able to obtain a job and pay off the tax debt. Consequently, TAS will work with the IRS to evaluate the results of its limited changes to the lien-filing process.

The Taxpayer Advocate Service is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should. If you believe you are eligible for TAS assistance, you can reach TAS by calling the TAS toll-free number at 1–877–777–4778 or TTY/TDD 1-800-829-4059.

Here's what the Report contains:

Continue reading "Taxpayer Advocate" »

July 5, 2011

Withdrawal Of Notice Of Federal Tax Lien

The IRS may withdraw a filed Notice of Federal Tax Lien (and so may the state of California) if the:


• Notice was filed prematurely or not according to IRS procedures;

• Taxpayer entered into an installment agreement to pay the debt on the notice of lien and the agreement did not provide for a notice of lien to be filed;

• Withdrawal will expedite collecting the tax; or

• Withdrawal would be in the taxpayer’s best interest and the best interest of the government.

The IRS will forward the withdrawal for recordation, provide a copy of the withdrawal to the taxpayer, and, if the taxpayer sends a written request, send a copy to other institutions the taxpayer indicates.

For professional tax help, call attorney Mitchell A. Port at (310) 559.5259.