Discussion:Any suggestions on the best approach to take? Staying Current in Payroll Taxes.
From TaxAlmanac
Discussion Forum Index --> General Chat --> Any suggestions on the best approach to take? Staying Current in Payroll Taxes.
Actionbsns (talk|edits) said: | 4 May 2007 |
| My client's business is suffering with the downturn of the real estate business. It's one of those flow through type businesess. They do pest control - tenting and such, which has enjoyed the benefits of a hot market for the last three years or so. Now comes the problem. Less Real Estate being sold, less houses being tented, less income coming in, all have served to create a tight money situation for client with the result being unpaid payroll tax liabilities. I have mentioned many times to the client that he needs to stay current or IRS will walk in and put a padlock on the door, I related my experience a few years back where they did exactly that, but nothing has worked to get him to take care of it. He called IRS and got the nice guy of the day who told him that when he received a letter, then he should call and they would work out a payment plan for him, but he should stay current in the interim. He has not stayed current since that call and I think his plan is to set up something like $500 a month.
I just came back from their office and the letters are starting, both Fed and State. Now he wants me involved with letter writing to set up the payment plan. I've done this type of work in the past with success, but I think the client had better reasons and had probably listened better. I need a solid approach to IRS and the State to help get this set up. Any suggestions? I'm basically more than a little annoyed at being blown off and ignored on my suggestions to him and it gets in the way of pleading his case well. BTW, the total liability now exceeds $100K between Fed and State | |
Bottom Line (talk|edits) said: | 4 May 2007 |
| WOW!! Get paid up front! Explain to the owner that he is stealing from his employees when he doesn't make these payments. I wish you luck; I see bad things coming. | |
| 4 May 2007 | |
| Look into co-employee leasing. The other party is responsible for paying the payroll taxes. The client has to pay the other party upfront for payroll and payroll taxes. IRS agents here like that move when the client gets behind. No payment, no payroll and the client can't get further behind. | |
Bottom Line (talk|edits) said: | 4 May 2007 |
| Good idea | |
| 20 May 2007 | |
| I am new to this forum but I can certainly relate to Actionbsns dilemma of a business owner's unpaid payroll tax liabilities. I am experiencing the exact same situation with a small business owner. I frequently remind him of the consequences and penalties involved, but to no avail. And Smog's suggestion of outsourcing a payroll company won't work in this situation, he won't hear of it. I've considered the scare tatic of telling him that along with stealing from his employees.....he will eventually be putting them in the unemployment line when the IRS shuts his business down. Any suggestions as to a professional way in telling this business owner the severity of his situation? | |
Actionbsns (talk|edits) said: | 20 May 2007 |
| Sandollar, it's not in the telling, it's in the listening and acting on what they are told. I've tried to get them to go the leased employee route, and I keep re-iterating that IRS WILL shut you down. Even related a story of one of my clients in California, where that actually happened. Last week we sat down and I told him it would be better to stay current with the taxes first of all because when we start dealing with IRS and the State, they will see he is trying, and secondly that when given the choice between a supplier and the taxes, sometimes the supplier is the guy that has to wait. They won't put a padlock on his door, and you can usually whine your way into their graces because they've possibly been in the same place financially before. They are starting to pay what they owe, but when I come back from vacation, they will probably have received their second notice and I'm going to have to jump in with some convincing arguments. On analyzing what has happened, their downturn started almost instantly after our earthquake in October, coupled with the slide in the real estate market, their income immediately took a serious dive and is only now starting to recover and very slowly. These are the points we are most likely going to focus on when pleading for leniency.
I took on a new client this year who is going through this right now, so far they are handling it themselves and haven't asked me to join in. So I'm watching how it goes. The IRS agent on this Island who handles this stuff seems to be the only one, or the one most used, I've heard his name before and I think I've spoken with him about someone else. So I'm going to kind of see how it goes with him because ultimately he'll be the one we will deal with most likely. | |
| 20 May 2007 | |
| Actionbsns, hopefully you can fill me in on the IRS involvement as it progresses. I'm afraid my client is on self-destruct professionally and personally. Tomorrow is a new fresh day, and I will once again attempt to make him listen. He has a very dedicated (small) staff, but still dedicated and they don't deserve this. Good luck with your projects as well. | |
Bottom Line (talk|edits) said: | 21 May 2007 |
| Someone will correct me if I'm wrong but I believe not paying trust fund money (which is the money which is withheld from employee's paychecks) is a criminal offense which can lead to jail.
You may want to consider firing this client if he just won't listen to you. All of a sudden this mess will become your fault. | |
| 21 May 2007 | |
| Just how responsible am I if I am an independent bookkeeper and inherited this situation? | |
Bottom Line (talk|edits) said: | 21 May 2007 |
| As long as you have no check signing authority (which I would NEVER do), I believe that legally (remembering that I am not an attorney) you are not responsible. However when you have a client that won't listen to your advice (which they are paying you for), it puts you in a difficult situation. When things go bad, the client will be looking for someone to blame besides himself. He will blame you for not fixing the situation since he believes that he pays you to keep him out of trouble and protect him from himself. You will be stuck writing the letters begging forgiveness and getting the telephone calls from an angry client yelling at you for things that you told him to do that he didn't do. Document the time and date that you told him to do certain things so when this comes back on you, you can say "I told you so". And most important, get your money up front! | |
| 21 May 2007 | |
| Documentation, very good suggestion. As far as signing authority, I do not and will not. He's often told me to go ahead and sign his name on the use/sales tax forms, but I flatly say "NO" and wait w/pen in hand until he does sign. (yes, we send the sales tax in manually!)
Even though it may require a bit more from me, I will be documenting everything from now on. Excellent suggestion, just wish it didn't have to come to this. To his credit, he has paid me faithfully and in a timely manner. | |
Dianeoffutt (talk|edits) said: | 16 April 2008 |
| I know this is an old discussion...but I thought I would post a situation I am going through. My client...ALSO has not taken my advice...now is behind in payroll taxes....approx $4K, for tax year 2007. He prepared his own W2 and wants me to prepare his SCorp. I looked at his corporate books (QuickBooks) and when I realized he has NOT paid his payroll taxes (he is the ONLY employee and sole shareholder)...I refused to prepare the SCORP return. I could not, in good faith send in a W2 that taxes were never deposited. So now my client is begging me to stay and help him and I really am not sure what the heck can be done. I have asked him to show me his quarterly returns...I want to see if he reported 941s and state UE and state W/H...but if not paid...what is the best approach pertaining to preparing the SCorp tax return. My gut instinct is he MUST pay his payroll taxes BEFORE the SCORP return can be correctly filed.
All responses will be so VERY appreciated. Diane Offutt Woodstock, Georgia | |
| April 16, 2008 | |
| Have the other payroll returns been filed? Is client planning on paying the taxes? Have you told him what his responsibilities are? | |
Nancyshoemake (talk|edits) said: | 16 April 2008 |
| As Natalie says, if the 941's have been filed and the amount is due - he owes back payroll taxes. My wonder is if he ever filed the 941s in the first place. If that is the case, you may not have a payroll liability. Now don't get me wrong - your client is not listening to you....but if the 941s were not filed - could they be distributions in 2007? just a thought! | |
Dianeoffutt (talk|edits) said: | 16 April 2008 |
I believe my client did file 941s. I am waiting for his response to THAT question. If he did not, then I was just going to consider the withdrawals as 1099 income to him. If I call them distributions he ESCAPES SE tax and I KNOW that is not his intention. He just got in a cash flow problem and contacted me AFTER the fact. I just wanted some ideas on the best approach in the event he did file 941s. I have already told him I am NOT preparing a 1120S showing W2 income and withholdings if he doesn't pay the payroll taxes. I guess, if he DID file 941s then he will have to pay those payroll taxes before I will claim that W2 as a valid W2. If he did not file 941s then I will give him a 1099, file his 1120S, and also file a Schedule C for the 1099 SE income.
If IRS questions why the 1099 I will be ready to explain he owes SE on THAT portion of what was withdrawn from the business. Going back and preparing all 4 qtrs of 941s is expensive and this client is close to bankruptcy. I am trying to keep my fees under control also. I posted this to see if anyone else had ideas of what to do...or any experience such as this. Thanks for responding Natalie and Nancyshoemake. | |
Dianeoffutt (talk|edits) said: | 16 April 2008 |
| Natalie,
To answer your questions; I am waiting to see about the 941s (if he filed). If he did, then yes, indeed, he owes PAYROLL taxes and will pay..just do not know when. As far as my advising him of his responsibilties..that is the very FIRST thing I discuss with ALL clients. Regardless of their legal entity setup. What happens is most of these clients, JUMP on their computers, SETUP LLCs or S-Corps, with little or none professional legal or accounting guidance. Then "AFTER THE FACT" when we, the accountants, or their attorney explains the problem they are in...they get mad. Most of my clients really adhere to my advice and life is GREAT....but there are others....and THIS client is one of my "others". Oh well.... | |
