“Even tax collectors came to be baptized. ‘Teacher,’ they asked ‘what should we
do?’ ‘Don’t collect any more than you are required to,’ he told them.”
Luke 3: 12-14
So it’s the New Year – 2016 – and we’re all getting our priorities together. In the Bible, John the Baptist told the tax collectors what their priorities should be. Today we’re gonna look at how well the IRS is listening.
- Payroll Taxes
The IRS requires us to withhold taxes from our workers, and then deposit those amounts generally within three days.
Businesses often delay making payroll tax deposits because they may be short of funds and are expecting a business turnaround or a customer payment. They know that the IRS won’t demand payment for several months. But this never works. Instead, the payment is delayed or never comes and the taxes owed are increased dramatically by penalties and interest.
The IRS sees us as holding that money in trust for the IRS. If we don’t make those deposits, then we have converted the employees’ money for our own use, a thief to be dealt with harshly, including liens, levies, and even transferring the liability from the business to the individuals who were responsible (The IRS standard for determining responsibility is very low).
Folks, one of the IRS’ highest 2016 priorities is unpaid payroll taxes. If your business is in this situation, get with an attorney (not an accountant) and learn what your choices are and how to implement them. This is a serious problem and the earlier you get after fixing it the better your choices.
- Penalties
Another priority for the IRS is imposing penalties, typically on people who file or pay late. These penalties are automatic – computer generated – on nearly everyone.
The same is true in audits, the IRS really tries to load taxpayers up with penalties. I’ve seen cases where the auditor actually wrote a report stating the penalties should NOT be imposed, only to be overruled by the group manager – typically an IRS lifer.
This situation is so bad that the IRS is issuing computer generated form letters denying penalty abatement requests before there has been a hearing and often times denying requests on grounds that weren’t even claimed.
Folks, here’s the truth. Penalties are not automatic. They can be set aside for a variety of legal reasons. Hire an attorney and get after it. This is an injustice and with perseverance we can prevail.
- Independent Contractors
When we hire an employee, we must withhold and pay social security taxes on their salary. When we hire an independent contractor, they must handle their own tax payments.
The IRS has decided it is much easier to collect money from one employer than dozens of employees so it tries to reclassify workers as employees and then pursue the employer for the prior three years of withholding, FICA, etc.
This is an incredible hardship and injustice. It is a surprise to the employer who never intended an employee relationship and often times can‘t pay. It is also unfair as many or perhaps even most of the workers have already paid their own taxes so that the IRS ends up collecting twice.
If you have workers that are paid as independent contractors, it is essential that the relationship be carefully and properly constructed to prevent IRS reclassification and to take advantage of several safe harbors.
The Bible is clear on what the IRS should be doing. Unfortunately, many within it are not listening. But I am listening and I encourage you to proactively seek help if you’re confronted with any of these issues.