Small business is a powerful economic engine that collectively, is not really small at all.  According to a study by the Small Business Administration (SBA), small businesses employ half of all private sector employees and pay 44 percent of total U.S. private payroll. This strong economic sector represents the hopes and dreams of business ownership and often is seen as a gateway to the American dream.  However, this important economic sector has never been so financially challenged as it is right now. At Gartzman Law Firm, we see first-hand the stresses small businesses are experiencing and unfortunately see a shirking of their financial responsibilities that can end up hurting them more.

The recession has carried on for so long it has good business people barely holding on. But decisions such as skipping payroll tax payments to the IRS in order to keep the doors open can ultimately bring on larger and more expensive tax problems over time. As an Atlanta Tax Attorney and CPA for IRS Representation and a business owner, I believe all business owners deserve to know how closely the IRS examines small businesses when it comes to their tax liabilities. They closely scrutinize small businesses in large part for their contributions to the annual tax gap; the amount of taxes that should have been paid (reported) and what was actually paid. The current tax gap is hovering around $400 billion dollars and is a priority of the current administration to reduce. To discourage underpayment, the IRS has placed severe penalties and interest on uncollected funds thus avoiding tax payments has become a more expensive and hard to hide from proposition.

There are two areas where small business owners frequently create IRS tax problems for themselves: delinquent payroll / employment and incorrect employee classification. Understanding how these following issues can become problematic may just deter a struggling business owner who might be tempted to use allotted IRS funds for business operations or anything other than paying Uncle Sam what he’s owed.

• Delinquent payroll / employment taxes – Payroll withholdings collected from employees are considered in “trust” by the business owner until paid to the IRS. If not paid by the due date, the IRS can invoke Trust Fund Recovery Penalties (TFRP) to anyone who willfully fails to collect or pay. This action causes payroll tax penalties of 100% of the original amount to be assessed personally against the responsible parties. Depending on the size of the company this can be significant.

• Incorrect employee classification – Business owners can get into trouble if they do not know the difference between an independent contractor and employee. The IRS posts a 20-point common law test that an employer could take to determine classification. Understanding the difference is necessary should a small business owner be exposed to an IRS audit that determines underpayment for your “employee.” This breach can make you liable for employment taxes, plus interest and penalties, if a worker is incorrectly classified as an independent contractor.

As a Tax Attorney practicing in Atlanta, Georgia, strict adherence to tax laws is the first order of business. Penalties and interest for delinquent business tax liabilities are extremely high and an unnecessary waste of business capital. For small and fledgling businesses, consider the following factors: the large capital investment in the business, a means of income for owners and employees, as well as an owner getting to do what they love. With so much riding on the business to succeed, one can understand the difficulty in keeping up with tax obligations when you are trying to keep the lights on.
Recognizing the current economic pressure felt by small businesses, the IRS has responded by adjusting some of their requirements calling this a series of new steps to help people get a fresh start with their tax liabilities and help delinquent business owners become current with payments. IRS commissioner Doug Schulman understands small business importance in the nation’s economy. These steps are both good for challenged business owners as well as for the tax system.

New and improved IRS lien processes include:

• Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens.

• Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.

• Withdrawing liens in some cases where a taxpayer enters into a Direct Debit Installment Agreement.

• Creating easier access to Installment Agreements for more struggling small businesses.

As a Georgia Tax Lawyer, I encourage small business owners currently experiencing IRS tax problems that may include tax liens that the time is now to take advantage of these IRS changes. If you are overwhelmed with the day-to-day operations of your business, let a tax attorney and CPA expert in small business tax resolution handle your case. These tax professionals understand a small business owner’s need to balance operational cash flow with tax obligations. By hiring their services, you can take the IRS pressure off and keep the business up and running smoothly.