Strategic Tax Leadership for Closely Held Businesses

Business Tax Solutions FAQ

What is my personal liability for business tax debt?

As a business owner, you can be held personally liable for "trust fund" taxes—money withheld from employees' paychecks (Social Security, Medicare, and income tax) that was not paid to the IRS. The IRS can assess a Trust Fund Recovery Penalty (TFRP) against any "responsible person" in the company, allowing the government to seize personal bank accounts, homes, or other assets to satisfy the debt.

Can I settle my business payroll tax debt for less than I owe?

Yes, through an Offer in Compromise (OIC), businesses can settle their tax debt if they can prove they are unable to pay the full amount. However, the IRS is historically much tougher on businesses than individuals regarding OICs because they view unpaid payroll taxes as "theft" from employees. A successful settlement requires a meticulous forensic financial analysis to prove that the business cannot sustain a full payment plan.

How can I legally minimize my business's annual tax burden?

Strategic tax reduction involves leveraging the correct business structure (e.g., S-Corp vs. C-Corp) and maximizing "ordinary and necessary" deductions. Key strategies include:

• Retirement Plan Contributions: Deducting contributions to 401(k) or SEP IRAs.

• Asset Depreciation: Accelerating the write-off of business equipment and vehicles.

• Hiring Family Members: Paying reasonable salaries to family for legitimate business work.

• Qualified Business Income (QBI) Deduction: Taking advantage of the 20% deduction for pass-through entities.

What should I do if my business is facing a Sales Tax audit?

Sales tax audits are often triggered by "markup method" assessments where the state estimates your sales based on your inventory purchases. If you receive a notice, do not provide records directly to the auditor without first consulting a professional. An Attorney-CPA can reconstruct your records to challenge the auditor’s estimates and prevent the audit from expanding into other years or tax types.

What is "Willfulness" in business tax non-compliance?

The IRS considers non-payment "willful" if a responsible person knew the taxes were due and chose to pay other creditors (like rent or vendors) instead of the IRS. Proving a lack of willfulness—due to honest mistake, negligence, or reasonable cause—is the primary defense against the Trust Fund Recovery Penalty and potential criminal charges.

How does an Attorney-CPA help with worker classification (1099 vs. W-2)?

Misclassifying employees as independent contractors is a major red flag that leads to massive back-tax assessments and penalties. We provide a legal and financial audit of your workforce to ensure compliance with the IRS 20-Factor Test. If already under audit, we defend your classification strategy to minimize reclassification costs and negotiate "voluntary disclosure" settlements to limit your liability.