Business Tax Disputes, and the Owners Behind Them.
Employment tax examinations, trust fund recovery penalty proposals, partnership audits and S corporation compensation issues can reach both a business and its owners. We represent businesses and responsible individuals before the IRS and in court.
The Trust Fund Recovery Penalty
When a business does not pay over income tax withheld from employees and the employees’ share of Social Security and Medicare taxes, the IRS can assess the trust fund recovery penalty under IRC §6672 against responsible persons who acted willfully. The penalty equals the unpaid trust fund tax.
According to the IRS, a responsible person is someone with the duty to perform and the power to direct the collecting, accounting and paying of trust fund taxes, which can include officers, directors, shareholders, employees and payroll service providers. Willfulness means the person was, or should have been, aware of the outstanding taxes and either intentionally disregarded the law or was plainly indifferent to its requirements. A proposed assessment generally can be appealed within 60 days of the IRS letter, or 75 days if the letter is addressed to a person outside the United States.
Other Business Disputes
Worker classification
Disputes over whether workers are employees or independent contractors. The federal and California tests differ, and the IRS Voluntary Classification Settlement Program allows businesses to reclassify workers prospectively under specified terms.
S corporation compensation
S corporations must pay shareholder-employees reasonable compensation before making non-wage distributions, and the IRS can reclassify distributions as wages when salaries are too low.
Partnership audits
Under the centralized partnership audit regime, the IRS examines the partnership, the partnership representative has sole authority to act for it, and any imputed underpayment is generally paid by the partnership unless an alternative such as a push-out election applies.
Employment tax returns
Examinations of Forms 941 and 940, withholding, and penalties for late deposits.
Business audits
Examinations of business deductions, credits and related-party transactions.
Representing the Business and Its Owners
A business and its owners do not always share the same interests, for example, in a trust fund recovery penalty investigation. We address potential conflicts at the outset, as the professional rules require, before representing more than one party.
Facing a Business Tax Dispute?
Contact Advantage Tax Law for a confidential consultation.