Any tax experts out there?

In today’s LA Times there is a story about a payroll service that took off with their client’s payroll taxes and with holdings which was supposed to be paid to the IRS.

The guy left the country and now these businesses are getting letters from the IRS that they want their money.

Someone told me that any amount over $20,000 that is stolen like this is not the responsibility of the businesses that got ripped off and they are not required to pay it.

Does anyone know if this is true or are these poor people on the hook for what was never paid by the payroll service?

AFIK, you’re responsible for your own taxes. The IRS might be willing to make an accommodation in a case like this, but that’s up to them, and it’s more likely they’d set up a payment schedule than to forgive the debt.

If the business had that amount embezzled from them, do you think that would entitle them to not have to pay their taxes?

That was my original question. If they already paid their taxes in good faith to that company, is there a limit to what they are liable for?

We are talking about payroll taxes here, not income or corporate taxes.

I can’t see why there would be a limit. The taxes haven’t been paid to the IRS, that’s the bottom line.

But interestingly enuf, in general, if withheld from the employee, even if sidetracked or stolen by other people (including the employer) on the way to the IRS, the employees are still credited.

That’s exactly what happened here, in fact. Embezzlement is taking money you have the legal right to possess, but not ownership of. It’s not just limited to employees taking things.

The payroll service company is not an agent of the government, they are an agent of the client (the operating company). The client should have done more diligence on the reputation of the payroll service company. The client is on the hook for the full amount of unremitted payroll taxes, the employer and the employee portion.

Their only source of recompense is to track down the owners of the payroll service company and seek restitution.