I regularly speak to the collection system or process that underlies IRS and state collections. A common theme that is promoted in our collection representation education courses is to try and control as much of the collection process as possible. There is nothing more powerful to one’s role in the collection process than knowledge and communication.
These key components of dealing with the IRS are true for individuals and businesses alike. And yet, when we talk about knowledge and communication we are so often referencing areas of improvement for business owners. Small to medium-sized business (SMB) owners are typically inundated with responsibilities. Not only are the company’s employees looking to owners for their livelihood, but many are still directly involved in the company’s production, its product.
Take these burdens and couple them with an IRS system that sends an extraordinary volume of mail to report on even the slightest detail (a change in reconciling small dollars on a return) and certain problem patterns develop. There are two very common scenarios that lead to the owner getting behind and thus losing control of the collection process very early on:
- Not opening IRS mail
- Empowering someone other than themselves to control the payroll process
The IRS is infamous for its mountains of mail. Taxpayers know it, tax professionals know it and the IRS knows it. For the IRS, it’s a crucial and relatively cost effective way to fulfill certain statutory obligations such as the need to keep taxpayers notified. And while it works there can also be a point of diminishing returns. It is not at all uncommon for the volume of mail to lead to the feeling that the letters never have any substantive material. This fosters an almost apathetic approach to the next letter that leads to missing key pieces of information such as notification of ability or an appeal.
That same feeling of apathy can develop in relationships within a business. Sometimes it’s not a lack of interest that creates the problem but rather putting too much unchecked trust in someone responsible for something as important for payroll. In any business, the owner carries the ultimate responsibility for ensuring that payroll tax obligations are met and met timely. Although someone can be hired for a specific skill like accounting, a business owner cannot delegate responsibility for employment taxes. There is no way to move that burden. A business owner will always be in a position to know where their company stands with its payroll tax obligations if this is clearly understood.
I recommend to my clients nothing short of weekly meetings, even if they are quick, to review the critical functions of their company. With many small businesses, there are going to be some issues. Knowing about the problems so they can be addressed is vital to getting back on top. Let us be of assistance when it comes to answering any of your questions by