Payroll Taxes (IRS / EDD)
IRS payroll tax audits are typically initiated during an income tax audit. They also sometimes occur if you are in collection for overdue or unpaid payroll taxes. Payroll tax audits are serious business. Even if your business is incorporated (or is an LLC or LLP), personal liability of the owners and/or managers may attach for a payroll tax liability.
Both the IRS and the Employment Development Department (EDD) can be quite aggressive at imposing personal liability for these taxes. The personal liability is sometimes referred to as “the 100% penalty”, because 100% of the trust fund portion of the taxes are imposed on the persons who are deemed to be “responsible parties”. Trust fund taxes are the amounts that are withheld from the employee’s pay. A qualified tax lawyer should be consulted before responding to such an audit.
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