COVID-19, also known as the Coronavirus has wreaked havoc throughout the world. Our thoughts and prayers go out to every individual and family across the globe. We hope and pray that the virus will be contained and normalcy returned quickly.
While COVID-19 has crippled the world economy, there is one specific positive to come out of the situation. The Big Bad Dragon (the IRS) is now sleeping!
What does COVID-19 Mean For Your 941 Payroll Tax Debt?
In short, a lot! The IRS has basically give each of us a payroll tax holiday! (Christmas in April?!)
As of today, April 15, 2020, there have been several adjustments to the tax world. For individuals, the tax filing deadline has been extended to July 15th. In addition, the IRS has been faced with shutdowns just like many businesses through the U.S.
From now until July 15, 2020 the following divisions are suspended:
- ACS – Automated Collection System
- PPS – Practitioner Priority Service
- And other locations
And the following actions have been suspended:
- Face-to-face meetings with Revenue Officers
- Lien Determinations
- Trust Fund Recovery Penalty investigations
In addition to a lack of movement by the IRS, they have also suspended a bunch of other items. Specifically, installment payments have been suspended from April 1st through July 15th. Even the OIC Program has stopped accepting applications and pushing everything until July 15th.
Additional Resources: CARES Act tax breaks every construction and trade contractor should tax advantage of
What does all of this mean?
It means you have an amazing opportunity to get your tax ducks in a row.
Specifically, you could be working on:
- Getting current and compliant
- Putting your financial analysis together
- Completing bookkeeping and collecting financial documentation
Current and Compliant
Becoming current and compliant is required before a resolution option is accepted by the IRS.
Current means that you are making current Federal Tax Deposits. When you pay payroll, and withhold Trust Fund taxes, start paying the federal government like you are supposed to do.
“But I don’t have the money to pay Federal Tax Deposits”.
If that is your response, then you need to start adjusting business expenses. With individuals, we call it, “living beyond our means”. Businesses do this too. It’s likely why you are in the place you are in right now.
You need to start by cutting out unnecessary business expenses. The IRS won’t allow those to stand in the financial analysis anyways. Start cleaning up your P&L right now. If a line item is not directly increasing revenue or an ordinary business expense (legal fees), then you should remove it.
Specifically, review these ares to reduce expenses:
- Poor contracts
- Printing costs
- Office supplies
- Too much inventory
- Excess bank or merchant fees
- Increased utilities
- Unnecessary equipment leasing
- Too many employees
Compliant means that all back tax returns have been filed. That means every single quarterly 941 needs to be filed. Depending on how many quarterly 941’s you need to have filed, it can take a while. No time like the present.
Without reviewing your tax account, you likely can’t determine all tax periods that need filings. However, you should know several of those periods off the top of your head to get started. You may have even received notices directly from the IRS. Start with those.
Putting Your Financial Analysis Together
The IRS extensively uses the financial analysis (Form 433-B) to determine resolution options. Fortunately, you can afford the time to put this together without the IRS banging down your door.
Review our article on Financial Analysis for more information.
Completing bookkeeping and collecting financial documentation
Last, this is a perfect chance to get some bookkeeping done. Also, collection the financial documentation needed to close your case takes time. Again, no time like the present.
Moral of the story? While the dragon sleeps, get ready to calm them down once they awake by having all those ducks in a row.
Let Us Help You
If you don’t want to deal with the headache of the IRS, let us help you.
We have always been a remote working team, so we remain open and operational. While we are open, much of the IRS is not.
Because of COVID-19, many IRS functions and resources are shut down. This includes the CAF Unit which is where Power of Attorneys are submitted. Unfortunately, we cannot conduct a normal Investigation of Liability without filing that POA. However, we can still complete a full financial analysis to help determine resolution pathway options.
Right now, we are offering this service at a discounted price. Check out the details right now: