#18 | Tax Debt Resolution Strategies Pt. 2

Practical Tax with Steve Moskowitz

Learn about options for dealing with tax debt and what happens when you can’t pay your taxes. This episode focuses on businesses with tax problems. This week Steve is joined by his long-time colleague Chris Housh. Chris chairs the firm’s tax resolution and business entity compliance practice groups and is the Vice President of the Golden Gate Society of Enrolled Agents. Listen to the full episode to learn more! Episode Transcript Intro: You're listening to the Practical Tax podcast with tax attorney Steve Moskowitz. The Practical Tax podcast is brought to you by Moskowitz LLP, a tax law firm. Steve Moskowitz: Welcome everyone. And thank you for tuning into our podcast. And this is part two of what happens when taxes can't be paid. Part one was for individuals. Part two is for businesses. And I'd like to introduce my friend and colleague, Chris Housh. Chris is both a tax attorney and EA, and Chris and I have worked together at the firm for over 20 years. He's the head of department that handles these type of cases, basically when a person or a business just can't pay their taxes. And in part one of this, we talked about what happens when an individual can't pay their taxes. Part two we're gonna talk about businesses and there is certainly some overlap between parts one and parts two. But in the business area, we're gonna go over some areas that we didn't go in individually because they don't apply to individuals. So, Chris, I have a question for you. What happens when somebody comes in and says, "I can't pay my payroll taxes?" What's the difference between payroll taxes and income taxes? Chris Housh: Payroll taxes is one of the special kinds of taxes that exist, sales taxes also in this boat. They're called trust fund taxes. And the government's explanation of it is that the person that you collected that tax from, trusted you to pay it over to the government. Your employee trusted you to go and take that tax that you with held out of their paycheck, to pay it to the government on their behalf. Your customer that you charge sales tax to trusted you to go and put that sales tax into the hands of the government. So with that, the government has that as one of the few things that can break out of a corporate or LLC shell and go against the individual alongside of the business. So the IRS on a payroll tax liability is going to ask to have an interview with the head of the company and any other responsible people that were in charge of making that decision, to be able to assess against the individual, a penalty to collect against that tax. Now they are only allowed to go and put to the individual, the amount of tax that was withheld from the people that are trusting. So your employee, they can only do to you the owner, the portion that was actually withheld from the paycheck, they can't go in and hold the businesses, share of FECA or the interest penalty assessed against the corporation. They can't do that against an individual. Now at the same time what they then do is ask to go and collect against the business and against the individual at the same time to pay into the same pot. Once the pot is full, they can't collect more than what's owed. So what often happens is at the business level, they have four pots for each year, that is getting paid by the business for payroll taxes. The employers share of FECA, the employee share of FECA, the employees federal tax withholding, and then the penalties and interest. At the business level you go and first pay the business' liability then the amount that was withheld from the employee's paychecks, and then the penalties. The business owner, if they're making a payment agreement at the same time, they're paying in solely into what was withheld out of the employees. So that that part gets filled up faster. And if you owe on multiple periods, they can start having that payment go down to period two, while the business is still paying period one.