Responsible persons’ lifeline: Express installment agreements — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Responsible persons’ lifeline: Express installment agreements

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in Office Management,Payroll Management

Undeposited payroll taxes can pile up so quickly that the IRS has a name for them—pyramiding. It also has a very effective solution: personally charging a company’s responsible persons with 100% of the undeposited taxes.

Relief: Under revised guidelines, responsible persons can avoid personal liability if their company owes no more than $25,000 (up from the previous $10,000) and it applies for an express installment agreement. Companies that owe more than $25,000 can qualify if they pay down their balances to $25,000 or less. (SBSE-05-0312-034)

Who’s responsible for what

It doesn’t take much to become liable for 100% of your company’s undeposited payroll taxes. You will be liable for this so-called trust fund penalty if you’re a responsible person. You can be a responsible person without being a corporate officer. There’s a two-part test to determine whether you are a responsible person:

  • You exercise some authority over the company’s finances (e.g., you have check-signing authority, even if you don’t have absolute autonomy over the company checkbook).
  • You willfully fail to deposit payroll taxes. What’s willful: You pay other creditors before you pay the IRS or you fail to investigate or correct mis­­man­­age­­ment after noticing that the company’s pay­­roll taxes haven’t been remitted to the IRS.

Criteria for relief

An In-Business Trust Fund Express Installment Agreement is available to companies that owe up to $25,000 and that meet these criteria:

  • You agree to use the IRS’ direct debit payment option
  • Your tax debt is paid in full by the earlier of 24 months or before the collection statute of limi­­ta­­tions expires
  • You owe payroll taxes only for the current or prior calendar year
  • You’re current with your tax deposits
  • Payroll taxes for two or more calendar quarters haven’t been assigned to a Collection Field function employee.

HOW TO APPLY:  To apply for an express installment agreement, call (800) 829-4933 or the number on your tax bill, or file Form 9465.

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