What is the worse mistake any business owner can make?
Going broke while owing the IRS for payroll taxes!
Why is this bad? The IRS looks at the failure to pay the payroll taxes that were withheld from the employees to be truly sinful moral problem. From a practical angle, they feel like it hits them twice. Once when the employer fails to pay the tax to them and a second time when the employees file their 1040 demanding a credit for the withheld income taxes.
What can the IRS do about it?
The IRS has a very strong weapon in their arsenal. They can access the "trust fund" portion of the tax onto any and all the people individually who were "responsible" for paying the tax and "willfully" did not. This is called the 100% penalty and it is particularly devastating on someone who has just lost their business and source of income. It can also be assessed on non-owners such as accountants and bookkeepers who have made the mistake of having check signing authority for the business. Once this assessment happens, the IRS has a minimum of 10 years to collect on the debt.
What should you do about it?
First, Get Professional Help to Represent you. Do not do the interview with the IRS Revenue Officer yourself. How you answer their questions is extremely important to anybody who had any management input.
Second, if you are still in business, you need a new plan. A plan that will either turn it around so that it produces enough cash to pay the taxes or a plan on shutting it down. Shutting it down is a hard step for most of us to take, but struggling on to the last breath will just produce a bigger tax debt to hang over your head.