YOU OWE THE IRS. HERE'S HOW THAT HAPPENED, AND HOW TO GET OUT.
It started with one missed deposit. Cash was tight, the GC was paying late, and payroll had to go out, so you told yourself you would make it up next month. That was six months ago. Now there's a six figure IRS balance, a Trust Fund Recovery Penalty notice addressed to you personally, and a business still short on the cash to fix it. This is one of the most common financial crises in commercial subcontracting, and it's survivable, but only if the cash flow underneath it gets fixed at the same time.
Payroll tax debt is almost never fraud. It's a cash flow crisis that got old. The reason it keeps growing after the owner already knows about it's that the two halves get worked separately: a tax professional negotiates the balance while the billing, the collections, and the forecasting that caused the skip stay just as they were. Then the repayment plan has to compete with the same tight Fridays that broke the first deposit. Both halves have to move together, or the plan fails and the balance starts over.
WHAT IT MEANS.
The Trust Fund Recovery Penalty is the IRS mechanism for holding a business owner personally responsible for unpaid payroll taxes, specifically the employee's share of Social Security, Medicare, and withheld income tax.
Payroll tax debt is almost never intentional fraud. In nearly every case it's a cash flow crisis that spiraled, which is why getting out of it takes two tracks at once. Somebody negotiates the balance with the IRS, and somebody rebuilds the billing and collections that made the first skip feel necessary.
THREE REASONS SUBCONTRACTORS END UP OWING THE IRS.
Cash runs short and the deposit gets borrowed
A GC pays late. A material bill comes in that has to be paid to keep the job moving, and payroll has to go out Friday. The owner skips the 941 deposit fully intending to make it up next week. That first skip is the start of a debt that compounds fast.
Months of skips before the IRS notices
The IRS doesn't always catch payroll deposit failures right away. A small operator might go 3 to 6 months before a notice comes. By then the unpaid deposits have grown to $60K to $150K plus penalties and interest, so what began as a $15K shortfall is now a $100K problem.
The trust fund penalty comes to you personally
The IRS splits payroll taxes into two buckets, the employer's share and the employee's share, and the employee's share is what it calls trust fund taxes. It pursues the business for the total balance and pursues the owner personally for the trust fund portion. That liability can't be discharged in bankruptcy. It follows you.
WHAT IT LOOKS LIKE IN DOLLARS.
The employer share of FICA and the failure to deposit penalty, which runs 2 to 15 percent, are owed by the business and can be discharged in bankruptcy. Interest, currently around 8 percent annually, is also a business liability. The employee share withheld and never remitted is owed by the owner personally and can't be discharged, and neither can the Trust Fund Recovery Penalty, which is 100 percent of the trust fund amount. If you owe $80K in trust fund taxes, the penalty is another $80K against you rather than against the company.
The stated balance understates the real cost every time. By the time the IRS has assessed penalties and interest, a $60K unpaid liability can become a $100K or larger obligation, and part of it's personal rather than corporate. Over 6 to 12 months of skipped deposits the total commonly reaches $50K to $200K, which is the range most owners are looking at by the time they call somebody.
HOW TO GET OUT WITHOUT LOSING THE BUSINESS.
Stop accruing new liability immediately, because the IRS won't negotiate while you're still falling behind. Every 941 deposit going forward gets made on time, every pay period, with no exceptions. Open a dedicated payroll tax reserve account so the money leaves operating the day payroll runs. Then engage a tax attorney or an enrolled agent to negotiate the back balance.
Build a 13 week cash flow forecast so payroll and tax obligations are visible weeks out instead of on Thursday night. Find the shortfall that caused the first skip and close it structurally rather than covering it again. Align the billing schedule to improve pay app timing and cut AR lag, and size the line of credit to the real AR cycle and not to whatever felt right the day it was opened.
Operating cash and the payroll tax reserve stay permanently separate. A monthly cash review flags any month where a deposit is at risk before it becomes at risk. Job costing identifies which jobs are draining cash so they get fixed instead of repeated. Underneath all of it's one rule: payroll taxes carry the same priority as payroll itself.
Open a separate bank account called Payroll Tax Reserve with no debit card attached to it. The day payroll runs, move the full deposit amount into that account, then deposit to the IRS out of that account and never out of operating. Review the reserve balance weekly inside the cash flow forecast. If the reserve looks light, that's a cash flow alert rather than a reason to skip a deposit.
THE OUTPUTS, NAMED.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing, no payroll, and no add-ons.
Pricing
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
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