The IRS is not a bank

Consulting with a client recently I learned that he owes the IRS over $30,000 in back payroll taxes plus penalties plus interest and is attempting to work out a payment plan with the IRS. This, unfortunately, is not an unusual scenario.

It is easy and tempting for a business experiencing cash-flow problems to defer making the required monthly or quarterly deposits of income and FICA tax withheld from employee paychecks. This is a terrible trap to fall into, because, as the withheld taxes are held in trust, the company has a fiduciary responsibility to deposit the money on the timetable stipulated by the IRS. Failure to do so can rack up significant penalties and interest. The IRS can go after the business and/or the owner or others responsible for failing to make the deposits.

The IRS is not a bank, and business owners with cash-flow problems need to find ways of raising cash, increasing sales, or reducing costs rather than not making timely tax deposits.