Payroll Tax Resolution

What happens if you have failed to pay the payroll taxes?

The failure rate of America’s small businesses is astounding. My guess is, 90% of small businesses fail. When a business fails, odds are the business will owe back payroll taxes. There is no application required. The only action required by the business owner is to not pay the taxes. As a business fails, it will run out of cash, when the business has no cash and the decision is, pay the payroll taxes, or make payroll, the business owner will invariably choose to not pay the payroll taxes.

I do not discuss this matter with any form of judgment. I have been there. I have spent the last dollar in the bank account to pay the payroll taxes. Having worked with hundreds of business owners that owe back taxes, I understand. I understand why it is that you have chosen to pay who you have chosen to pay. I understand the nightmares and the emotional turmoil that you are going thru.

The client that I meet has many of these characteristics:

  • 9The business has not filed the required payroll forms. Often times, these forms have not been filed for many number of years.
  • 9The business has not paid payroll taxes. Often times, the payroll taxes have not been remitted for a number of years.
  • 9The business went thru a rough patch. Maybe a key employee left the company, maybe the business lost a big contract, maybe the economy stinks and nobody is doing what the business does, whatever the cause the business is going thru a rough time.
  • 9Stress anxiety
That said, just because I understand, doesn’t mean that you aren’t in any trouble. Payroll taxes are the life blood of the United States Treasury. The IRS takes very seriously the failure to file and pay all payroll taxes and reporting requirements. You are in a lot of trouble.

The business owner that I meet has come to the understanding that the situation is serious and they need help. How does the process work? What happens next?

Our initial interview I will ask you a series of questions to start to identify what needs done, what tasks the client can perform, what tasks the firm needs to perform and at what stage is the IRS at in their process?

Questions that I ask during our initial meeting

1. What year did the business start?

2. How many employees do you have?
3. Where are all of the employees located?
4. When did you hire the first employee?
5. When did you file your last Form 941?
6. When did you make the last payroll tax deposit?
7. Have you filed all the W-2’s?
8. Has the IRS contacted you?
9. Who from the IRS has contacted you, do you have their card?
10. What was the title of the IRS employee?

11. Can you repay the balance owed?

I am not going to go into a bunch of hypothetical cases, I am going to make a series of assumptions and there are a few ground rules that are applicable to almost all cases:


If you have not filed a Form, you must become compliant with all tax filings. This may be rule #1.

No more damage can occur. You cannot owe any more payroll taxes. I would tell you, you must stop the bleeding and the bleeding must stop today.


  • 9The business owes back taxes.
  • 9The business needs to file some if not all returns due.
  • 9There has been a Revenue Officer assigned to the case.
  • 9The business owes a significant amount of money.
  • 9The business’s ability to repay is in doubt, but the business owner and myself think repayment is possible.
Almost from the beginning the IRS is going to want to meet with the owner and take a tour of the business. The business owner can resist this meeting and visit, but it is almost assuredly going to happen. The business owner will have to decide the overall case strategy rather quickly.

The owner can make the Revenue Officer work for the meeting and a tour of the business, but you will need to choose your battles wisely. The Revenue Officer is simply trying to do their job. The business does owe money. Maybe a meeting isn’t that bad. Maybe some goodwill can be generated and maybe the business can sway the IRS into being more lenient. Maybe you get a little bit ahead if you play nice.

For the most part, the Revenue Officers that I have met want to close case files. If you haven’t filed and you owe the IRS, the Revenue Officer simply wants the taxpayer to become compliant and enter into a repayment process. Compliance and repayment allow the Revenue Officer to close your case file. The IRS lacks enough Revenue Officers to effectively work the country’s case load. Odds are good that the Revenue Officer assigned your case is overworked and pressured to do their job.

Some Revenue Officers are nice. Some clients come to think of them as friends. Some Revenue Officers want to help. I do believe that you get further with sugar, and why does anyone need to be mean and nasty. However, please remember that these people are doing their jobs. They are not your friend. They are trained to ask you certain questions and elicit certain responses. Their job is to collect taxes, and especially back payroll taxes.

Almost immediately the Revenue Officer is going to seek to complete a Trust Fund Recovery Penalty interview and complete a Form 4180.

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