The Internal Revenue Service only has a limited amount of time to collect late payroll taxes that your business owes. If the IRS doesn’t collect the remainder within the enactment, the remaining balance is written off, and any federal tax liens that have been filed for the balance are discharged. But the general bills may be prolonged when specific things happen during the collecting time.
However, if payroll taxes are not submitted, business owners may be held personally accountable for the overdue amount of tax liability, also known as the Trust Fund Recovery Penalty. The TFRP comprises interest and the amount of any taxes that your company failed to pay, including benefits for Medicare and Social Security. For multiple workers, the tax responsibility and TFRP can add up to a decent amount.
The IRS does not always have the right to pursue your company and its officers for failing to file payroll taxes. The statutes of limitations prevent the state from imprisoning you indefinitely. The statute of limitations on unpaid payroll taxes is 10 years. When your payroll duty return is submitted, which is also the day the tax is assessed, the time begins. The enactment begins later if you submit a payroll tax return after the deadline.
The IRS has disputed when the assessment date was, even though that is typically when the letter is received. Certain circumstances, such as the following, can also postpone the CSED (Collection Statute Expiration Date) by stopping the 10-year clock:
- Declaring bankruptcy
- Residing abroad for at least six months
- Military postponement
- Submitting a compromise offer to satisfy outstanding taxes.
- Bringing legal action against the IRS
- Getting divorced, getting judgments against you, etc., and having your assets held in court custody.
When IRS begins payroll audits, they’ll ask for various documents and bank statements. It is then that you can seek tax guidance for a tax professional to not fall under any criminal charges or penalties.
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