Ways To Resolve Unreported Payroll Taxes

Ways To Resolve Unreported Payroll Taxes

Payroll tax debt puts you and your business at risk to the IRS. Instead of avoiding paying what you owe, you can meet this obligation in an efficient and timely manner by using one of the 12 ways to pay unreported payroll taxes.

The possible consequence of unpaid payroll taxes

The IRS takes unpaid payroll taxes seriously. It will do its best to collect what you owe, even if it means taking legal action against you or your business. When you don't pay your payroll taxes, the IRS can put you in jail. The IRS can also severely penalize you, including a fine of up to 33% of what you already owe.

In the worst-case scenario, you can lose your business completely. The IRS can shutter it and sell it to pay payroll taxes.

Keep in mind that some businesses are subject to tax delinquency 

That being said, it's also important to realize that tax delinquencies happen to the best of business owners, and it may not be your fault. A supplier or customer could have gone out of business without paying their taxes.

In return, you should take advantage of the cash flow to pay for your normal business expenses. You no longer have to pay social security charges, but even so, the IRS expects you to pay this tax on time and without fail.

Act immediately

When you realize you owe taxes on unpaid wages, you need to act immediately. Avoiding or ignoring this obligation altogether will only make the situation worse. The IRS can shut down your business, arrest you, and investigate your employees. You must use the options available, such as an installment agreement, to pay what is owed and save your business. You should consult a tax expert who can help keep your business open while paying unpaid payroll taxes.

Stay up to date with past returns.

You can keep track of your previous tax returns by completing the most recent one first. After filing the most recent return, you must try and file the remaining previous returns. You should do this even if you can't afford to pay what you owe.

If possible, you should put some money aside to pay the most recent return first. You can then make payments for the remainder, proving in good faith to the IRS that you are serious about clearing your back-payroll taxes.

Don't contact the IRS alone.

You should avoid talking to the IRS alone. The IRS agent on the other end of the line may lead you to implicate yourself. He or she can ask you important questions about your employees, their roles, and other details.

Instead, you should hire a tax professional to contact the IRS on your behalf - that tax professional will know what information to provide and will avoid your involvement in something for which you should or should not be responsible.

Get help from a tax expert.

A tax expert can be a valuable ally in your efforts to settle your unpaid payroll taxes. This professional can protect you from IRS collections. The professional can advise you on the various tax reduction programs available.

For example, your tax professional may recommend that you make an offer in compromise, which you can use in eliminating any tax debt. You can also request a reduction in the penalty, which can eliminate fines and interest on your tax debt.

Create an up-to-date payroll tax record

You need to do your best to make regular payroll tax deposits when you're trying to pay your back-payroll taxes. You must first take care of your current payroll deposits before entering into negotiations with the IRS.

This step helps you avoid delays in what you already own. You need to pay your current payroll tax deposits if you want the IRS to talk to you about settling your delinquent tax obligation.

Form 433-B

You will also need to complete Form 433-B, which can be found on This form allows you to provide details about your business to the IRS. It discloses the following information about your business:

  • Assets

  • Debts

  • Expenses

  • Income

It must be submitted to the IRS before negotiating the rest of what you owe for unpaid payroll taxes. The IRS will use the form to determine how much you can pay off the debt each month.

Provide all the necessary documentation

The IRS will also insist that you provide all the necessary documents before negotiating what you owe. The documentation the IRS may request includes:

  • Account statements

  • Profit and loss account for the current year

  • Copies of your company's monthly invoices

  • Account receivable aging reports

  • Recent payroll summary

  • Proof of federal income tax return

These documents will be used to determine how much your business earns and spends and how much it can pay on the obligation each month.

Request an installment agreement in writing

If you want the IRS to agree to an installment payment agreement, you must make this request in writing. When you apply in writing, you should state how much you think you can afford each month. The value should be reasonable and consistent with the income of your business.

You must also include the date and amount for the corresponding tax year. These details are important if you want to change or dispute something later. It also avoids confusing the request with another exercise.

Meet IRS deadlines

Since the IRS provides deadlines for filing returns, submitting documents, making payments, and other matters, you mustn't ignore this information. Failure to meet the deadlines could jeopardize your business or put you in jail.

You could have your assets frozen or have company assets garnished. To protect valuables, such as business equipment or receivables, you must adhere to IRS deadlines.

Know your rights and options as a taxpayer

As a taxpayer, you have rights even if you owe the IRS money. By law, you must be aware of the available tax settlement options.

You also have the right to seek representation whenever you deal with the IRS. A tax professional has the experience and training to act as an intermediary between you and the IRS.

Bottom Line

These strategies can help you successfully solve your back-payroll tax filing problems. They give you the option of filing an income tax return. You can also pay what you owe through an offer in compromise or installment agreement. You can decide which option is best for you and learn more about your rights as a taxpayer by hiring a tax professional such as UNIVERSAL ACCOUNTING & FINANCIAL SERVICES, INC. to help you, today.



Contact Member