Tool 9: Small-Business Payroll Tax Warning Sheet

When to use this

Use this checklist when a business is behind on employment taxes, has missed federal tax deposits, or is considering using withheld payroll funds to cover other bills. It is intended to help you recognize issues that need prompt attention before you discuss a payment or resolution proposal.

Gather payroll reports, deposit confirmations, employment-tax returns, IRS notices and the records showing which periods remain unpaid. Separate current payroll obligations from older balances so the immediate operating problem is not hidden inside one total.

The sheet is not a calculation of your liability or a determination of who is personally responsible. Use it to prepare questions for a qualified tax professional. For a voluntary payment you want to designate, also read the trust-fund payment model letter.

Worksheet

• The money withheld from employees' pay is held in trust. It is never the business's money.
• Failure-to-deposit penalties run 2%, 5%, 10%, and 15% depending on lateness and notice.
• The IRS assigns employment tax cases to revenue officers quickly and acts to stop pyramiding.
• Any responsible person who willfully pays other creditors instead of the trust fund taxes can be assessed 100% of the trust fund portion personally. The entity does not shield you.
• The personal assessment survives the business closing and is never dischargeable in bankruptcy.
• Get current on deposits before any negotiation; enroll in EFTPS and automate.
• Designate every voluntary payment in writing to the trust fund portion of a specific quarter.
• Have a representative present for any Form 4180 interview; the answers are sworn.
• Protest a proposed Trust Fund Recovery Penalty within 60 days of Letter 1153 if you have a real argument.
• Never move the business into a new entity to leave the debt behind.
• Verify your payroll service's deposits yourself every quarter through your own EFTPS account.