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Payroll tax compliance, part 2: options for resolving debt

In part one of this post, we began discussing employers’ payroll tax obligations. As we noted, there are multiple types of employment taxes, with very specific requirements for withholding, depositing and reporting.

But what happens if you get behind on those requirements? In this part of the post, we will outline some of the options businesses have for resolving payroll tax debt.

The consequences of not paying tax debt are of course a familiar theme in this blog. One of the most basic of these consequences is when the IRS files a tax lien against your property. For a small business, this can really be a concern because a tax lien may impact your ability to get the credit you may need to run your business.

As with other types of tax debt, unpaid payroll tax obligations also lead to tax penalties. When interest is added in, these penalties can quickly become very burdensome. This is especially the case for businesses with financial struggles whose tax troubles were prompted by cash-flow problems in the first place.

One option you may want to consider for resolving payroll tax debt is an online payment agreement. Businesses that owe $25,000 or less in payroll taxes to the IRS are eligible to apply for this.

Even if you are not eligible for online payment, it may be possible to work out an agreement with the IRS to pay in installments. Making an offer in compromise (OIC) may be another possibility.

There is also a particular type of installment agreement for small businesses called an “In-Business Trust Fund Express Installment Agreement.”

In short, if you are facing payroll tax debt, you have options. It makes sense to weigh them carefully with counsel from an experienced tax attorney. For more information about how to proceed, please visit our page on payroll taxes.

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