IRS Payroll Tax Audits and Unfiled Returns in New York: What Business Owners Need to Know

 For years, a business owner has been building their business, employing people, and providing for their customers. At some point, the business owner receives a letter from the IRS asking for payroll tax records or the filing of unfiled returns. What may appear to be a routine inquiry could actually be the tip of an iceberg that has been growing for months, or even years. Payroll tax problems and unfiled returns typically do not develop because a business owner set out to break the law, but rather evolve during times of financial stress, rapid growth, understaffing or unforeseen business interruptions. The fact is that the IRS does not treat payroll tax responsibilities the same way as other types of tax debts. Because these funds are collected for the benefit of employees and the tax authorities, payroll taxes are more of a priority for the IRS. New York business owners and individual taxpayers could save time and money by learning the risks of dealing with payroll tax audits and unfiled returns, and by taking preventative action. This can result in more options and easier-to-manage actions than taking action once enforcement has started. Many taxpayers facing these challenges begin searching for a Top Unfiled & Payroll Tax Lawyer New York.

Why Payroll Taxes Require Considerable Attention

Payroll taxes hold a special place in the federal tax system. Employers are obligated to withhold taxes from the pay of each employee and remit the taxes to the government. When the employer does not forward the taxes collected from the employee, the IRS may treat the issue differently than other taxes because of their obligation to the employee and tax authority. Many business owners in this situation eventually consult a payroll tax attorney.

It is common for business owners to fall behind due to difficult financial times. Some examples include: a business experiencing slow growth, losing an important client, or encountering unforeseen costs that may drain cash flow. Many times the owner intends to make the payment once funds are more readily available, thereby failing to understand that these liabilities compound. Business owners often seek guidance from a payroll tax lawyer New York when these issues begin affecting operations. These debts grow and begin to incorporate penalties and interest; in turn, they quickly escalate, causing significant problems both for the business and the parties financially involved. At this stage, many individuals start looking for the Best Payroll Tax Lawyer New York.

The Pitfalls of Not Filing Returns

Many people erroneously believe that by not filing a return, they will somehow postpone or delay their tax liability. The opposite is typically true. Because it is common for employers to report income paid to their employees to the IRS, along with reporting amounts from banks and other third parties, the IRS has a considerable amount of information even without an filed tax return. This is a common concern for taxpayers dealing with unfiled tax returns new york. Once the return is not filed, the IRS will utilize available information and make estimates of your tax liability. These estimates likely will not account for deductions, credits, or expenses the taxpayer is entitled to. Consequently, the tax liability assessed will likely be much higher than an filed return. Many taxpayers seek assistance from an unfiled tax returns attorney New york after receiving these assessments.

Not filing a return will also make it difficult to enter into any payment plan or agreement with the IRS; most times the taxpayer must first agree to file their delinquent returns before they will consider making an agreement to pay taxes. In these circumstances, an unfiled tax returns lawyer new york may be consulted.

Payroll Tax Audit Procedure

Most business owners do not receive an audit notification simply because their business engaged in malicious activity. The audit notification may be based on an inconsistency, an irregularity, or a standard compliance review; but nevertheless, it can lead to significant issues. This is often when a payroll tax audit attorney becomes involved. During a payroll tax audit, the examination may involve requesting payroll tax forms, payroll records, payroll tax deposit forms, accounting ledgers, bank statements, and other relevant financial information. Business owners often find themselves with additional questions concerning their employees' classification and status as employees or independent contractors, their handling of payroll tax payments, or their methods of reporting payroll tax expenses. Sometimes, a business owner may not think one piece of information is important; however, that piece of information can become a red flag that results in further questions when examined with all the other evidence presented. This is when an income tax audit lawyer becomes incredibly valuable.

What Happens When Collection Efforts Commence?

The worst possible outcome for a taxpayer is typically when he or she begins to receive notices from the IRS that indicates collection is now imminent. There are several forms of IRS collection actions available, including a federal tax lien (that is filed and made public and can affect the taxpayer's credit score and future ability to obtain a loan), a levy (that permits the IRS to seize bank accounts, accounts receivable and wages) and garnishment (where the IRS will take portions of your wages each payday). Many taxpayers facing these actions contact irs wage garnishment attorneys. For a business owner who already has a tax issue, additional debt, or increased complexity with respect to that issue, these actions only add to an already dire situation, and not addressing them will only permit the IRS to take further action. At this point, many people begin searching online for a payroll tax attorney near me.

A Civil Issue Is Generally Civil in Nature

However, the IRS has the authority to refer taxpayers who have evaded tax liabilities to the Department of Justice for possible criminal prosecution if the government believes tax evasion was intentional. Allegations of tax fraud, hiding of income, false bookkeeping, or fraudulent statements to tax officials and the government, will undoubtedly cause scrutiny from the IRS and potentially federal law enforcement authorities. Taxpayers concerned about these allegations often consult a tax evasion attorney nyc.

Simply owing taxes to the government does not warrant a criminal referral. The same can be said for being audited; receiving an audit notice does not indicate criminal activity has been committed. Individuals often seek guidance from the best criminal tax attorney to better understand their rights. If a business owner or an individual taxpayer suspects that their case has risen to this level, they should contact a qualified and experienced tax attorney for counsel immediately prior to providing information to the IRS. In many cases, a New York tax defense attorney can provide valuable assistance.

The Problem of Sales Tax in New York

As you know, federal taxes are only one of many obligations that a business owner may have. Business owners are also obligated to remit sales tax collected for sales and services to the New York State Department of Taxation and Finance. Many companies facing these issues seek help from a sales tax audit lawyer new york.

Frequently Asked Questions

What will become of my returns if I haven't filed for years? 

The odds are extremely high that the IRS will calculate what it believes is owed, likely implement penalties and then allow interest to accumulate over the years. Getting started with resolving this issue of unfiled tax returns can substantially mitigate this growing problem.

Will an underpayment penalty of payroll tax be individual?

 Most certainly it could be; there are numerous situations that may create individual liability for some of the unpaid payroll tax liability. Information for each circumstance could impact a case in its entirety.

Can a tax attorney get a wage garnishment removed? 

We have resources and expertise in negotiation with taxing authorities as well as to review collection possibilities, discuss alternate means and to address alternative relief.

How is an IRS audit different from a sales tax audit?

 An IRS audit generally involves an individual's personal income tax liability. State taxing authorities generally administer a sales tax audit.

Conclusion

A sales tax audit, unpaid payroll taxes and/or unpaid tax returns and business debt are common examples of circumstances that impact individuals and businesses alike. Outstanding years of unpaid tax liability may accrue aggressively during times of personal hardship and/or changes and can also occur during times of job loss or financial difficulty. Nevertheless, there are various debt resolution alternatives provided by state and federal taxing authorities. Whether the tax problem involves unfiled individual income tax returns or individual or business unpaid sales taxes or payroll taxes that span years, addressing such an issue promptly could be to your best advantage.