Payroll and payroll tax compliance in Nashville

An employer files Form 941 every quarter and Form 940 once a year. Form 941 reports the federal income tax, Social Security and Medicare withheld from employees’ pay, together with the employer’s share of Social Security and Medicare. It is due on the last day of the month after each quarter ends: April 30, July 31, October 31 and January 31.

Form 940 reports federal unemployment (FUTA) tax, which the employer pays and never withholds. FUTA is deposited by the end of the month after any quarter in which the tax owed passes $500.

The returns are only half the obligation. Federal tax deposits must be made by electronic funds transfer, on either a monthly or a semiweekly schedule that the employer determines before each calendar year begins. A return filed on time with deposits missing still leaves a balance, and it is the deposits the IRS looks at first.

The Trust Fund Recovery Penalty (TFRP) is a penalty equal to the unpaid balance of a business’s trust fund taxes, meaning the income tax withheld from employees plus the employees’ share of Social Security and Medicare. It applies when those taxes can’t be collected from the business, and it is assessed against people, not the company.

The IRS can assess it against anyone with the duty and the power to direct how the taxes are handled who willfully fails to collect or pay them over. That can include officers, employees, partners, directors, shareholders, board members and payroll service providers. Willfulness requires no evil intent. The person only has to have known, or should have known, about the unpaid taxes, and paying other creditors with the money available is treated as a sign of it.

Letter 1153 is the IRS’s notice that it proposes to assess the Trust Fund Recovery Penalty against you personally. It comes after a Revenue Officer’s investigation of who was responsible, and it starts a 60-day period, or 75 days for a letter addressed outside the United States, in which you can respond and appeal before the penalty is assessed. The IRS must wait out those 60 days before it issues notice and demand for payment.

Those 60 days are the time to put the facts about duty, authority and knowledge in front of the IRS, because once the penalty is assessed it becomes a personal balance with its own collection process. How field investigations run is covered on the Revenue Officer representation page.

Current deposits come first because every unpaid quarter adds to the balance being negotiated, and the IRS’s settlement options expect the current quarters to be paid. For an Offer in Compromise, an employer must have made the federal tax deposits for the current quarter and the two quarters before it before the offer is even considered.

The same rule runs through the firm’s own process. Its fifth step, implementation and ongoing compliance, names current payroll deposits beside timely returns and estimated payments as part of keeping any agreement with the IRS. For a business owner, that means the payroll for this quarter is sorted out before the old quarters are proposed for a plan or an offer.

What a payroll engagement includes is agreed with Tyrone J. Taylor directly, since the old site names the service without listing its scope. The books that support it are on the accounting and bookkeeping page.