Corporate Turnaround Artistry

Chapter 6Arsonists and Regulators

“Google ‘IRS 941 Prison,’” I tell my clients, “to see what comes up.” It's pages of explaining how employers can go to prison for not properly forwarding payroll trust funds on to the federal government. It's the dumbest crime in America, but stressed‐out entrepreneurs do it every day because they are so desperate to maintain the status quo. The 941 is the payroll tax that an employer withholds from the employee's checks and is obligated to forward those funds to the IRS on behalf of their employees. The employer is merely a trustee of these funds and there is absolutely zero business purpose or claim to that money in any way. A good payroll agency will not even process your payroll without these funds, because the failure to pay them is so fraught with peril. Death remains the only way out of a 941‐withholding problem, not bankruptcy, not a sale, not a liquidation, only death. If you stay out of prison, plan to survive on government‐allowable standards of expense (See Figure 9.2, page 241) and on the government seizing future tax returns and placing a lien on your social security checks.

The most powerful collection agency in the world (the U.S. Treasury) has made it very clear that collecting 941s is a top priority. Every time I have any influence or even proximity to payroll I get written statements from the payroll company that they will not process a payroll without the 941 funding and will immediately issue a letter to the board chairman, ...