Robert J. Fedor, Esq., L.L.C.

Tax court sides with IRS, requires payment on 30 year tax debt

Most Ohio residents likely hang on to old tax documents for a few years. While rare, if audited officials at the Internal Revenue Service may request tax-related documents that are three or more years old. For small business owners, tax matters are typically more complex and include the added pressure of keeping track of business-related expenditures including those related to employees and payroll.

Business owners with employees are required to pay payroll taxes on those employees. While the IRS denies singling out small business owners for tax audits, small business owners seem to be disproportionately subjected to IRS audits. One recent tax court case shows how a business owner may be liable for tax errors long after the assumed statute of limitations has passed.

Typically, the IRS is able to collect on back taxes owed for up to 10 years. In a recent ruling, however, the tax court allowed the IRS to collect monies owed related to employee payroll taxes from 30 years ago.

The case Beeler v. Commissioner involved three former business owners who, due to difficult economic times, failed to pay payroll taxes during 1982. Three years later, the IRS discovered that the three businessmen had failed to pay the taxes and judgements were issued against all three men.

In 2001, the IRS accidentally discharged the tax liens against the three men. By the time the IRS discovered that it had made a major error in releasing the tax liens nearly 30 years had passed. The matter was brought before a tax court who eventually sided with the IRS meaning the 30 year payroll tax debt must be repaid.

This case illustrates why it's important that business owners be vigilant in ensuring they accurately report and pay taxes. Failure to do so may result in fines and penalties and even possible criminal charges.

Source: Forbes, "Can IRS Collect 30 Year Old Tax Debt? You Bet," Robert W. Wood, June 5, 2013