There are often reasons outside your control why your business taxes go unpaid, such as having unexpected bills that ate into more of your finances than you projected or a major downturn in the economy that negatively impacted your annual earnings. Other times taxes are unpaid because you simply did not pay taxes — perhaps because you mistakenly or purposely did not pay payroll taxes the previous year.
Regardless of your reasons, IRS Form 2751 and IRS Letter 1153 can help keep your tax information straight. This guide will walk you through everything you need to know about Form 2751 and Letter 1153, including how they can help you manage unpaid taxes and maintain good standing with the IRS.
What is Letter 1153?
Letter 1153 is a form sent to individuals who have unpaid taxes. It lets them know the amount of the debt and, in many cases, their options for paying it back. Typically, you will receive this letter if your company has failed to pay payroll taxes on your income, and the IRS has decided to hold you personally responsible for those losses.
What is IRS Form 2751?
Typically, IRS Form 2751 appears on the last page of Letter 1153. If you sign Form 2751, it acknowledges that you accept the debt and will take steps to pay it back. You should not sign this form if you plan to argue the debt.
How to Fill Out IRS Form 2751
In order to fill out Form 2751, you will need to put in:
- The name and address of the business that failed to return payroll taxes
- The tax return form number that was filed
- The date the form was filed
- The amount owed
- The trust fund penalty assessed
You must submit Form 2751 or contest Letter 1153, including the income tax debt assessed by the IRS, within 60 days of receiving the letter. If you fail to contest it within that time period, you accept the tax debt and will need to make arrangements to pay it.
What is a Trust Fund Recovery Penalty?
The trust fund recovery penalty is a tax penalty assessed on a business that fails to pay income taxes on its employees. A few facts to keep in mind:
- Many businesses choose to make quarterly payments to the IRS rather than sending in payments each payroll period.
- They hold the payroll taxes for their employees in a trust fund until the time comes to pay them.
- Failure to pay those trust fund taxes in a timely manner can result in a trust fund penalty assessed against the company.
As an employee, you may be held personally responsible for any payroll taxes not paid on your behalf, especially if you choose not to pay in Social Security and Medicare taxes or deliberately fill out your tax information incorrectly.
Common Questions & Answers with Form 2751
As you fill out Form 2751, you may face some issues that can make it difficult to manage your tax debt and understand the implications of your interactions with the IRS.
Working with an experienced tax attorney can make it easier to fill out this information accurately and reduce the odds that you will be held personally responsible for a business’s error.
Here are some of the most common problems filers face:
Q: Does filling out Form 2751 acknowledge your acceptance of that debt?
A: It depends. You will then be held personally responsible for paying the tax debt, even if your employer actually bears liability for the funds mentioned in IRS Letter 1153. Some individuals do choose to pay the tax debt personally to prevent the IRS from sending their information to collections.
That does not necessarily mean you are the responsible person in this instance, but it can help prevent you from facing collections action. If you plan to contest the tax debt, you should not fill out Form 2751.
Q: Will I need to create a payment plan following IRS Letter 1153?
A: If you are the responsible person with regards to the tax debt, and you need to take care of managing those payments, a payment plan can help alleviate some of the immediate financial burden associated with your taxes. Work with an experienced tax attorney to get a better idea of your options and how they will impact other finances.
Q: What about the statute of limitations?
A: Talk to a tax attorney to get a full assessment of your actual tax debt and when the statute of limitations runs out. In general, the IRS has 10 years to collect unpaid taxes from any party, whether business or private entity. If you receive an IRS Letter 1153 in regards to a tax debt that is more than 10 years old, you may need an attorney to help you manage those payments.
Q: If I’m a company executive, do I have the ability to make payment arrangements?
A: Taxes sometimes go unpaid simply because you forgot to make the payment or suffered financial difficulties that made the debt difficult to manage. If you hold a position of power within your company or receive that letter on behalf of your business, the simplest thing to do is to make payment arrangements (so long as you have no plans to contest the debt).
Fill out and sign Form 2571 and mail it back to the IRS within 60 days. Then, make sure that the responsible person takes care of those payments in a timely manner so you do not fall further behind.
Get Help with Form 2751 and IRS Letter 1153
Managing tax debt can create significant issues, both for businesses and private individuals. If you receive IRS Letter 1153, you need to consult with a tax attorney about your options for payment as soon as possible. Such experts can provide a full assessment of what you and your business owe and give you a better idea of your options for repaying or contesting the debt.
Do you have unpaid tax debt? Did you recently receive IRS Letter 1153? Contact Silver Tax Group today to speak with an expert about any Form 2751 questions you might have.
