What Are Payroll Taxes and Trust Fund Taxes?

Withheld payroll taxes are frequently referred to as “trust fund taxes” due to how the employer holds the employees’ money in a trust until a federal tax deposit is made. When your business fails to withhold the appropriate amount of taxes, you can be penalized regardless of the form of your business entity. If the amount of taxes you owe exceeds $100,000, the IRS may assign a Revenue Officer to your case.

For the trust fund recovery penalty to apply, your business must meet two conditions:

• Responsible person: The IRS defines a “responsible person” as one who “has the statutorily imposed duty to make the tax payment” for an organization.
• Willful failure: The IRS defines “willful failure” as a conscious, voluntary and intentional failure to pay taxes.

When you partner with Polston Tax, we’ll help you reach a reasonable agreement with your Internal Revenue Officer and get your delinquent taxes sorted out in the shortest time possible. We specialize in designing action plans for businesses no matter your budget or the complexity of your case.

Payroll Tax Representation and Help for Businesses

All employers are required to withhold and match certain taxes from their employee’s paychecks or wages and are required to send them to the IRS. Payroll taxes are withheld on behalf of your employees and then remitted to local, state and federal authorities. Payroll taxes include the following:

• FICA: Your business’s FICA dues are comprised of your Social Security and Medicare taxes and are paid by both the employers and employees. As the employer, you must pay 6.2% for social security and 1.45% for Medicare, and you remit the same percentage from your employees. Within FICA, the Social Security portion of your taxes is referred to as OASDI, or Old Age, Survivors, and Disability Insurance.
• FUTA: This is a federal unemployment tax that’s paid exclusively by employers. FUTA covers unemployment insurance and costs a total of 6.0% overall, but most states have a 5.4% credit that reduces the amount employers pay to 0.6%.

Employers are also required to file certain payroll tax forms with the IRS, such as a Form 941, Employer’s Quarterly Federal Tax Return, and a Form 940, Employer’s Annual Federal Unemployment or FUTA Tax Return.

When employers fail to file these tax returns and pay money for the taxes due, the Internal Revenue Service won’t be shy about getting the money. If a business owes back payroll taxes, they will most likely have a local Revenue Officer assigned to investigate the business and the officers of the business, take an inventory of the business assets, complete a trust fund interview to determine personal responsibility attributed to officers, and make a determination if the assets of the business should be seized, or if the business should be shut down.  Revenue Officers can take very aggressive tactics and often contact the customers of a business to issue notices of levy that the business owes taxes.

How Are Payroll Taxes Calculated?

Payroll tax withholdings are calculated using two methods — wage bracket methods and percentage methods. The wage bracket method is the easiest way to calculate your payroll taxes.

Wage Bracket Method

The wage bracket method is calculated using IRS Publication 15-A in “Wage Bracket Percentage Method Tables.” These tables are set up in accordance with employee pay periods and then checked into a W-4 form. An employee’s status as single or married directly impacts the number of allowances they can claim.

After you’ve determined the gross wage for your pay period in columns A and B in the 15-A form, subtract the amount from Column C and multiply your results by the percentage in Column D. Employees can also request additional tax withheld from each paycheck. The final sum is the amount you should withhold from your employee’s paycheck for their pay period.

Percentage Method

The percentage method is recommended for large businesses and is typically more complicated than the wage bracket method. To find the right tax withholdings using the percentage method, you must determine how much FICA (Social Security and Medicaid) tax is due.

FICA taxes are paid using 50% of your employee’s paycheck and 50% of your business’s own revenue. It is your duty as an employer to remit your employees’ FICA from their paychecks. FICA tax rates are currently at 12.4%, half of which is paid by the employer and half of which is paid by the employee. Medicare is similarly split with a 2.9% current rate that is halved between you and the employee.

Why Choose Polston Tax IRS Payroll Tax Assistance?

Polston Tax has extensive experience providing tax relief to businesses with unique challenges and situations. At Polston Tax, we set ourselves apart with the following benefits:

• A well-rounded team approach: Polston Tax is home to a large body of tax specialists who can approach your case from multiple angles to gain new insights and advantages. With staff members knowledgeable about everything from accounting to appeals, we can help you prepare your case and sleep easier at night knowing we have your back.
• IRS familiarity: We have a deep and complex understanding of the IRS’s inner workings and know how to strike deals and compromises that will work for your business. Our team works directly with the IRS to craft a reasonable actionable plan, so you can receive the best result possible.
• Comprehensive services: At Polston Tax, we’ve seen everything. With our wide range of services and our dedicated team, we have you covered in even the most complicated situations. Get back to business and take the weight off your shoulders with comprehensive tax services from Polston Tax.

Payroll Tax Representation From Polston Tax

If you shut your business down but still owe payroll taxes, there is still hope! There are always options. Let us help you today!