Unpaid 941 Taxes – How to handle an Unpaid 941 Tax Issue

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Another one of the Issues that we handle as Small Business Accountants is Unpaid 941 Taxes. One of the easiest ways to get your business shut down, is to not make your payroll tax deposits. In a prior posts, I discussed how expensive this can be. After receiving many questions in reference to this issue, I decided to follow up with a post on what to do next. So you have a balance of unpaid 941 tax issues. Here’s a step by step guide on what needs to be done. 1 – Check the IRS transcript to make sure that all of your payments have been posted I’m sure its difficult for you to imagine, but our friends at The Federal Government do make mistakes from time to time. You need to make sure that all of your payments have been credited. 2 – Make sure that your payments have been posted properly between Principal, Penalty, and Interest When 941 payments are late, they automatically accrue penalty and interest. Penalties can range anywhere from 5% to 100% and interest changes monthly with the published federal interest rate. When making a payment late, you must instruct the service on exactly how you would like the payment to be applied. You will want them to apply the payment first to principal, then to penalty, then to interest. If you do not instruct them on how to apply the payment, they will normally apply it to their best interests rather than to yours. In other words, they will normally apply it first to interest, then to penalty, then to principal. You’ve heard stories of how people originally owed the IRS $50K. They have already paid $75K, and still owe another $30K. This is exactly how something like this happens. 3 – Pay it off, work out a payment plan, or do an Offer in Compromise If you can pay it off, do. If you can make monthly payments that will pay off the entire amount, great. If your balance is under $25K, it is easy to set up a payment plan. If not, you will need to work one out with a Revenue Officer. If you cannot make reasonable monthly payments, you will need to complete an Offer in Compromise. This stuff isn’t easy. If you have ever tried to read an IRS transcript or spoken to an IRS collections officer, then you already know what I mean. Most of the companies in the “IRS Tax Resolution” do nothing but steal from clients. They put you on a monthly fee of $300 or $400 per month, and do nothing but drag their heels while billing you promptly every month. Find someone that actually has the experience necessary to properly get you out of trouble, and keep you there. If you have difficulties like this, please contact us. For further information, please go to www.AccountingSolutionsltd.com