Today’s Economic Environment is Creating Tomorrow’s Tax Issues
I was on a call with Mark Reynolds, a CPA who refers cases to me, about one of his business clients, Ben Ortiz.
We talked about tariffs increasing input costs, suppliers raising prices mid-quarter and customers pushing back on higher pricing.
In other words, margins are getting squeezed from both sides.
Finally, Mark said, “He’s not in trouble yet… but he’s starting to make decisions under pressure that will get him into trouble."
In other words, Ben is having to decide who to pay and when. And that includes the IRS.
Here are 3 ways today’s economic environment is quietly turning into tomorrow’s tax issues.
1. Tariffs and Inflation Are Rewriting the Cost Structure of Your Clients’ Businesses
Things cost more, but it's more macro than that.
Business owners who used to import goods at a predictable cost are now dealing with:
Sudden increases tied to policy changes
Suppliers passing through higher costs with little notice
The need to find alternative vendor
At the same time, inflation is hitting everything else:
Labor costs rising—sometimes significantly year over year
Rent and overhead increasing with little room to negotiate
Service providers raising rates to keep up with their own costs
So now your client is getting squeezed from multiple directions:
Input costs are higher
Operating costs are higher
Pricing power is limited because customers are feeling the same pressure
Most businesses can’t fully pass these increases on. So the business absorbs it.
Margins erode—consistently, quarter after quarter.
2. Lower Margins Turn Cash Flow Into a Series of Tradeoffs And Payroll Taxes Become the Line That Gets Crossed
Once margins shrink, everything changes.
Clients stop thinking in terms of annual performance. They start thinking in terms of what has to get paid right now to keep the business alive.
It's now and not now. There's little future planning. What clears today? What buys another week?
Vendors need to be paid or inventory stops. Suppliers need to be paid or pricing gets worse or supply disappears. Employees need to be paid or the business doesn’t function. So those get prioritized.
And then there’s payroll taxes. That's the employee's money, but it's viewed as cash sitting in the business account that could solve an immediate problem.
So the logic that precipitates the downfall begins.
“We’ll use this now to keep things running… and catch up later.”
Instead of making payroll tax deposits:
They pay vendors to keep operations moving
They cover short-term obligations to avoid disruption
They buy time—hoping revenue stabilizes
And just like that, they’ve crossed into one of the most dangerous areas of tax debt. Not because they're evil people, but because they’re trying to keep the business alive.
3. The Delay Between Decision and Consequence Is What Turns This Into a Real Problem
Business owners think they're in control because nothing happens right away.
No IRS agent shows up the next day. Their bank accounts aren't frozen.
All they need is a little time. Because revenue will surely stabilize soon.
Behind the scenes, payroll tax liabilities don’t sit quietly:
Penalties escalate quickly
The IRS tracks missed deposits
Tax debt builds, not just for the business, but very likely for the owner personally
And for a while, nothing happens.
Inevitably though, revenue doesn't straighten out. The business owner can't pay back the payroll funds they used to keep the business running. And then they repeat the scam. And on and on it goes.
By the time the IRS shifts from passive to active—from notices to enforcement—the situation has turned into something much more serious.
A growing liability with aggressive penalties
Personal exposure through the Trust Fund Recovery Penalty
A Revenue Officer assigned to the case along with the threat of levies and garnishments.
What was supposed to be a manageable bridge becomes an existential problem.
Why This Matters Right Now
Because tariffs, inflation, and rising costs aren’t temporary pressures.
They’re ongoing.
The decisions your clients are making under pressure will have tax consequences.
Be ready.
TL;DR
⏩ Tariffs are increasing input costs and disrupting supply chains
⏩ Inflation is raising labor, overhead, and operating expenses
⏩ Businesses can’t fully pass these costs on, leading to lower margins
⏩ Tight margins force short-term cash flow decisions and tradeoffs
⏩ Payroll taxes are often used to keep the business running, with the intent to catch up later
⏩ These “temporary” decisions compound into serious tax liabilities over time
➥ Contact Attorney Stephen A. Weisberg for a free Tax Debt Analysis.
Contact Me Here: https://www.weisberg.tax/contact-1
Email: s.weisberg@weisberg.tax
Phone/Text: (248) 971-0885
Address: 300 Galleria Officentre, Suite 402, Southfield, MI 48034
