Quarterly Tax Filing Dates
Question: If my employer file for bankruptcy and they haven’t paid the taxes they withheld from my…?
…wages do I still owe the taxes?
My wife worked for a company that went bankrupt, they paid everything they owed her for wages, vacation , sick time etc. on her last check. Now we get a letter from their lawyers saying she’s scheduled for money in their bankruptcy filing under priority status. The only thing that makes sense to me given the amounts involved is that they withheld taxes from her wages but hadn’t paid them to the IRS because their quarterly payments weren’t due before the filing date and now they’re a debt to my wife. This is also happening to THOUSANDS of others in this bankruptcy. Is this possible? Is it legal? Is there a way for us to check with the IRS to see if the amounts listed for withholding on her last pay stub are the same as what’s been paid to them?Answer: Short answer: You owe taxes on what you received (as you would expect). THEY owe the payroll taxes.
See article below:
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Declaring bankruptcy is of very limited help when it comes to dealing with unpaid payroll taxes. While it may buy you some time, it doesn’t discharge the debt.
The IRS holds business owners and co-owners personally liable for payroll taxes. This means that unpaid payroll taxes, even when bankruptcy is declared, can result in the IRS taking personal assets such as private accounts, cars, or vacation homes valued up to the amount owed. For this reason, business owners should make it a priority to pay payroll taxes.
If you’ve filed for bankruptcy and have unpaid payroll taxes you don’t have the money to pay, your best option is to negotiate a payment plan with the IRS, or make an “offer in compromise” for less than you owe.
If you owe less than $25,000, you should be able to get an installment plan fairly easily. The downside to a payment plan is that the interest can total up to 8 to 10 percent a year on the amount still owed. The other stipulation is that anyone asking for a payment plan on back taxes must be current on their own yearly taxes.
If, on the other hand, you make an “offer in compromise,” you’re asking the IRS to reduce the amount you owe. Doing so requires that you file IRS Form 656 (PDF) and pay a $150 application fee. The process is neither easy nor fast. Once you submit the forms, you’ll be required to supply the IRS with massive amounts of information — from pay stubs to vehicle registrations. You must be able to show either that it is doubtful the IRS will be able to collect the full amount from you, or that doing so would create an unfair economic hardship. (For more information on this topic, be sure to check out Offers In Compromise.)
There are two primary downsides to making an offer in compromise: First, if the IRS refuses the offer, you’ve already provided them with all the paperwork they need to quickly seize your assets. Additionally, during the lengthy application process, interest is accruing on the money owed. If the offer is ultimately granted, you’ll be expected to pay the amount in full within two years, or have a Notice of Federal Tax Lien imposed.
IRS requirements are often both lengthy and complicated. If you find yourself owing the IRS a large debt in unpaid payroll taxes, you’d be wise to hire legal representation to aid you in your negotiation process.
Be sure to read Alternatives to Declaring Business Bankruptcy for help in avoiding bankruptcy altogether.
U.S. Cellular Reports Second Quarter 2010 Results
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Filing your Quarterly Withholding Tax Return
