The Scenario – Your business has fallen behind on paying payroll taxes. You can borrow some money, but not enough to pay off the full past due amount. Now what?
The answer is that you want to minimize the impact of the IRS assessing a penalty on you personally for 100% of the unpaid Trust Funds. The way you do it is to make a voluntary payment with a check. On that check you want to write in the comments section “Trust Funds Only”. Due to Revenue Procedure 2002-26, the IRS must comply with your request on how to apply the payment against your account.
Why is this good? Sooner or later the IRS is going to get around to collecting those payroll taxes. Their big tool in this process is to access a penalty on the “responsible parties” equal to 100% of the money withheld from employees’ paychecks for income, social security, and medicare taxes. If you make a payment for the business to cover part of the past due amount without any designations, the IRS will automatically apply it first to the unpaid employer taxes. This allows them to maximize the 100% penalty when it is assessed.
If you or someone you know has received a Notice of Intent to Levy or some other federal or state tax issue, please feel free to contact me at either (352) 317-5692 or email firstname.lastname@example.org .