Is a tax problem putting your business at risk?

For business owners, the most serious tax problems usually involve payroll. When you have employees, you withhold taxes from their wages and send that money to the IRS on their behalf. If cash flow gets tight and those payroll taxes go unpaid, the IRS treats it far more seriously than ordinary debt, because that money was never yours to begin with. Through what is called the Trust Fund Recovery Penalty, the IRS can hold you, or another responsible person, personally liable for the unpaid amount, reaching past the business to your personal assets.

Payroll is not the only pressure. Business income taxes, commingled business and personal finances, and the simple reality that a slow season can make taxes the last thing that gets paid all contribute. Businesses are also more likely to be audited than individuals, and an audit of one year or one issue can expand if it is not handled carefully.

What makes business tax problems urgent is how quickly they can threaten the business itself, through liens, levies on business accounts, or personal exposure for payroll taxes. What makes them resolvable is that the IRS does have structured ways to address them, and acting before the situation escalates gives you the most room. The first step is understanding exactly what you are facing, business and personal.