Basic Accounting

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IRS Tax Debt and 941 Payroll Taxes - How To Keep Your Business Afloat

April 11th, 2008 | Category: , Small Business, IRS, Cash Flow, Receivables, Blog Carnivals

When I file my 941 payroll taxes how do I know how much to take out of each employee’s paycheck?

How much you take out is determined by the number of exemptions your employee put on their W-4 when you hired them. That will determine how much to withhold on their paycheck and how much you have to pay to the IRS on your quarterly 941 returns.

If I miss one of my quarterly payroll filings, does the IRS have a “grace period” before they hit me with a debt?

No the IRS does not offer any kind of grace period. If you don’t pay them on time they immediately asses your debt and start adding interest and penalties immediately.

When I miss a quarterly return how does the IRS figure out the amount I owe?

The IRS estimates how much taxes you should owe based on your employee’s W-4 statuses. That amount then has interest and penalties added onto it from day one after you missed paying the money.

I’ve been using the same contractor for years. He’s had trouble with his business lately so I’ve offered to hire him on permanently. Do I still pay him as a contractor on my 1099 or do I make him a 941 employee?

If you’re hiring him on as a permanent employee then he would become a 941 regular employee. You would have him fill out a W-4 and start paying him regular paychecks with the standard tax withholdings.

Can I get some kind of relief from my tax debt if I can prove that I couldn’t pay my quarterly withholding because of financial difficulty?

Unfortunately no, the IRS doesn’t really care about how good your business is doing. If you can’t afford the withholding the IRS would tell you to either let some employees go or cut their hours for less withholdings. In the meantime you still owe your quarterly 941 withholdings plus interest and penalties.

Now you have the smoking gun…Use it!

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Richard Close was an IRS-Hitman. He worked as a revenue officer for the IRS and his father was the head of the collections branch for 30 years; so it runs in the family. He left that behind and now he’s partnered with Tax Defense Network to help thousands of Americans with their tax problems. He gives the tips and tricks for you to fight the IRS and win! Visit him at: http://irs-hitman.blogspot.com or http://www.taxdefensenetwork.com or contact: email irs-hitman@taxdefensenetwork.com or 1-888-248-9058.

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