NFIB

Work it Out
01/ 24/ 2006
by Emily McMackin

What happens when meager cash flow forces you to choose between paying rent, utilities and salaries or making quarterly payroll tax payments? Borrowing from the government to cover basic needs might seem like the right choice when cash is tight. But before you can say “I-R-S,” tax delinquencies add up.

“It’s better to miss payroll than to make payroll and get behind on your tax deposits,” says Kenneth Johnson, president of Effectur, a Greensboro, N.C.-based firm that helps business owners negotiate delinquent payroll taxes with the Internal Revenue Service.

Many small businesses fall into this trap, he says. It sneaks up on them because, unlike vendors and creditors, the IRS doesn't call right away about late payments. But when an agent does call, it can mean serious trouble for your business, especially if you're fuzzy on payroll tax regulations and collections law.

“Negotiating with the IRS is like defending yourself on a murder charge––it’s that complicated,” Johnson says. “The implication of doing it on your own isn't getting the death penalty, but it can cause significant financial stress.”

His advice? Leave it to the professionals. Effectur, for instance, uses tax negotiators who once worked for the IRS and understand its intricacies.

Negotiators work to arrange payment plans on your behalf and keep the IRS from garnishing your wages or seizing assets in the meantime. They may even get your collection fees lowered by showing that they can bring you into compliance.

“We try to first help people get out of difficult situations, so they can keep their businesses,” Johnson says. “Once we get them on the right road, we like to ensure their future compliance by advising them and referring them to payroll services.”

Tax negotiators cost about $200 to $2,500, depending on the complexity of the case. The payoff? Peace of mind.

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