Ensure the protection of your business! Both the IRS and State have the authority to close down your business, making it crucial to stay compliant.

Unlike many bills your company has, not paying payroll taxes do not go away and you as the owner remain personally liable even if you shut down the company. 

The IRS takes non-compliance with payroll tax obligations seriously and employs various enforcement actions to ensure compliance.   It is their top priority among colleting taxes.   Employers who fail to file quarterly federal tax returns or make timely payroll tax deposits may face asset seizures, business closures, tax liens, substantial penalties, personal liabilities, and even criminal charges.  Unfortunately, particularly after COVID many employers fell behind.  It was more important to pay rent, to keep the phones ringing, and payroll taxes could wait  – they weren’t due today.  And there would be time to catch up.  It was done with all good intentions.  But the catch up day never came for many.  If you are one of the many, the Payroll Tax Resolution Attorneys at Tomes Law Firm can help.

Payroll taxes consist of two components: income tax on wages paid and the employee’s share of Social Security and Medicare tax, as well as the employer’s matching share of these taxes. Employers are legally obligated to withhold these taxes from their employees’ wages and pay both the employee’s and employer’s portions to the IRS. Form 941 is filed quarterly, with the deadline falling on the last day of the month following the end of the quarter. Small employers with minimal annual liability may opt to file Form 944 annually.  The IRS and State consider the money withheld from the employee’s paycheck as being held “in trust” for them by you the employer.  It is for that reason that they are so serious about not turning it over.

Failure to file Form 941 or make timely payroll tax deposits can lead to significant penalties. Late filing of Form 941 incurs a 5% penalty on the total tax due, with an additional 5% charged each month the return remains unsubmitted, up to 5 months or 25% of the total tax due. Delinquent payroll tax deposits are subject to penalties ranging from 2% to 15%, depending on the number of days late and the stage of IRS notices received. So on a $10,000 you could owe not only the $10,000 in taxes but an additional $4000 in penalties. And then there is interest too. 

Paying late is bad enough in the mind of the IRS an the State, but in cases where a business fails to pay payroll taxes, the IRS can hold “responsible persons” personally liable for the unpaid taxes.  Responsible persons can be the owners, management, people charged with signing checks and paying bills including the bookkeeper in certain situations and outside accountants.  A finding of a responsible person could subject your own paycheck and your own bank accounts to be wiped out.  It could also impose jail time if the violation is considered flagrant.

Payroll Audits for Small Businesses are Increasing in Frequency

Payroll tax issues should not be dealt with lightly.  Waiting until the IRS does it interviews of your employees is not smart.  Waiting until you have been assessed is not smart.  The IRS and State can close your business and seize your assets and you are still responsible to your customers.  Don’t wait  – engage the services of experienced tax attorneys like the Payroll Tax Resolution Attorneys at Tomes Law to find out what can be done to get you back on track.  The sooner you call and work out a plan, the more options your have and the better the chances of keeping criminal penalties out of the picture.

Call us at (732) 333-0681 to get started!

If you need assistance with your payroll tax matters, we encourage you to contact us for a free, no-obligation confidential  consultation with one of our tax attorneys. Every tax situation is unique, and we can analyze your circumstances and propose the best course of action.

Top Payroll Tax Questions New Jersey Employers Ask

If you run a business in New Jersey, payroll taxes are one of the most complicated — and unforgiving — areas of tax law. The questions below are the ones New Jersey employers search for most. If you recognize your situation in any of them, Tomes Law Firm is here to help.

Schedule a Free Consultation or Call Us: 732-333-0681

What Are Payroll Taxes in New Jersey?

New Jersey employers are responsible for two layers of payroll tax: federal and state.

Federal payroll taxes withheld from employee wages include Federal Income Tax, Social Security (6.2%), and Medicare (1.45%) — collectively known as FICA. Employers also pay a matching share of Social Security and Medicare, plus Federal Unemployment Tax (FUTA).

New Jersey state payroll taxes include State Income Tax withholding, State Unemployment Insurance (UI), State Disability Insurance (DI), and Family Leave Insurance (FLI). These are deducted from employee paychecks and remitted by the employer on a regular schedule.

The rates depend on employee earnings — and the compliance burden falls squarely on the business owner.

Who Must Register for Payroll Taxes in New Jersey?

If you pay wages to even one employee working in New Jersey, registration is almost certainly required. The threshold is lower than most business owners expect.

You are required to register if you are:

  • A corporation, LLC, partnership, or sole proprietorship with NJ-based employees
  • An out-of-state business whose employees physically work in New Jersey
  • Hiring even one part-time or seasonal worker
  • A household employer paying a nanny, housekeeper, or caregiver above the wage threshold

The rule is straightforward: if wages are flowing to someone working in NJ, assume registration applies.

Not sure if you’re properly registered? Attorney Frances Tomes can review your situation and help you correct any gaps before they become penalties. Contact us or call 732-333-0681.

What Payroll Taxes Do New Jersey Employers Have to Pay?

Beyond withholding taxes from employee paychecks, New Jersey employers must pay their own share of several taxes — funds that come directly out of the business, not the employee’s wages.

Employer-side payroll tax obligations in NJ include:

  • Federal Unemployment Tax (FUTA)
  • NJ Unemployment Insurance (UI)
  • NJ Disability Insurance (DI)
  • Supplemental Workforce Fund
  • Workforce Development Partnership Fund

Many business owners are blindsided by these employer-side contributions. Missing them — even unintentionally — can trigger audits, penalties, and personal liability.

How Do I File Payroll Taxes in New Jersey?

NJ payroll tax filing requires two separate tracks: federal and state.

Federal Payroll Tax Filings

Federal tax deposits are made through the Electronic Federal Tax Payment System (EFTPS).

  • Monthly depositors: Taxes due by the 15th of the following month (if you had $50,000 or less in payroll tax liability in the prior lookback period)
  • Semi-weekly depositors: Taxes due within 2–3 business days (if you exceeded $50,000)

Form 941 — Employer’s Quarterly Federal Tax Return — due the last day of the month following each quarter.
Form 940 — Annual FUTA return — due January 31.

New Jersey Payroll Tax Filings

  • NJ-927 — Employer’s Quarterly Report — due the last day of the month following each quarter
  • WR-30 — Quarterly Wages Report for UI/DI/FLI — due the same day as the NJ-927
  • NJ-W-3 — Annual Reconciliation — filed annually

Falling behind on any of these filings — even by a few days — can trigger significant penalties. If you’re already behind, acting quickly is critical.

What Happens If I Miss a Payroll Tax Filing Deadline in New Jersey?

Missed deadlines carry steep consequences at both the federal and state level.

Federal Penalties

  • Failure to file Form 941: 5% of unpaid tax per month, up to 25%
  • Failure to deposit tax: Up to 15% of the amount not deposited on time
  • Additional monthly penalty: 0.5% per month on unpaid balances, up to 25%
  • Daily interest compounded from the original due date

New Jersey Penalties

  • Failure to file NJ-927: $10/day for the first 5 days, then $10/day or 25% of the unpaid amount — whichever is greater
  • WR-30 penalties: $5 per employee for the first late filing, $10 per employee for a second offense within 8 quarters, and $25 per employee for subsequent offenses
  • Interest at 1.25% per month until payment is received
  • Collection fees added if your account goes to collections

These penalties compound fast. If you’ve missed filing deadlines, Tomes Law Firm can help you minimize the damage and negotiate with the IRS and NJ Division of Taxation. Schedule a consultation or call 732-333-0681.

Can Payroll Tax Penalties Be Reduced or Waived in New Jersey?

In limited circumstances, yes.

At the state level, NJSA 54:49-11 gives the Director of the Division of Taxation authority to waive penalties when a failure to file was due to reasonable cause — a strict standard that requires a written statement under penalty of perjury. Ignorance of the law does not qualify. For late payment penalties, you must demonstrate undue hardship, which is interpreted even more strictly. Using the funds to pay other business expenses does not qualify.

At the federal level, the IRS offers a First Time Penalty Abatement (FTA) policy if you have a clean compliance history. You may also request penalty relief based on reasonable cause.

Successfully obtaining penalty relief requires thorough documentation and the right legal argument. Attorney Frances Tomes has over 33 years of experience negotiating with the IRS and the NJ Division of Taxation — and knows exactly what these agencies require.

How Can I Correct a Payroll Tax Error in New Jersey?

Errors happen — but how quickly you address them matters enormously.

You can file an amended payroll tax return to correct mistakes. However:

  • For overpayments, you must file the amended return within 3 years to receive a refund
  • NJ late payment penalties and interest continue to accrue even if the error was unintentional — timeliness matters
  • The IRS also charges interest from the original due date regardless of fault

If you discover a payroll tax error, contact an experienced NJ tax attorney before filing anything. Acting without counsel can result in inadvertently waiving rights or triggering a broader audit.

Can Payroll Taxes Create Personal Liability for Business Owners in New Jersey?

Yes — and this surprises many business owners who believed their LLC or corporation protected them.

Federal Trust Fund Recovery Penalty (TFRP)

Under IRC § 6672, the IRS can assess a penalty equal to 100% of the unpaid trust fund taxes directly against any “responsible person” — individually, not just the business.

A responsible person is anyone with authority over which bills get paid: owners, officers, directors, and sometimes bookkeepers or controllers with check-signing authority.

This penalty applies if the person was a “responsible person” AND they acted willfully — meaning they knew taxes were owed and chose to pay other expenses instead. Fraudulent intent is not required.

This penalty:

  • Can be collected from the individual personally
  • Frequently survives bankruptcy
  • Can follow the individual after the business closes
  • In willful or severe cases, can lead to criminal prosecution and potential prison time

New Jersey Personal Liability

New Jersey has parallel mechanisms. Officers and responsible employees of a corporation can be held personally liable for unpaid trust fund taxes — including withheld income tax and employee UI/DI/FLI contributions — under state law.

Who Is Considered a “Responsible Person”?

The IRS and NJ look at actual control, not just title. Responsible persons may include:

  • Business owners and co-owners
  • Corporate officers (President, Treasurer, CFO)
  • Anyone with signing authority on the business bank account
  • A bookkeeper or controller who decided which bills to pay

Critical warning: Never treat withheld payroll taxes as available cash flow — even temporarily. Using those funds to cover payroll, rent, or vendors is precisely what triggers personal liability. Those funds were never the business’s money to begin with.

If you’re facing a Trust Fund Recovery Penalty assessment, contact Tomes Law Firm immediately. Frances Tomes, Esq. has successfully defended NJ business owners against TFRP assessments. Schedule a consultation or call 732-333-0681.

What Records Do I Need to Keep for Payroll Tax Compliance in New Jersey?

Employee identification and status

  • Name, address, Social Security number
  • Date of birth (for employees under 19, per FLSA youth employment rules)
  • Form I-9 — retain for 3 years after hire or 1 year after termination, whichever is later

Wage and hour data

  • Hours worked, pay rates, overtime earnings, deductions, total wages paid, pay dates and periods, tips reported
  • Timesheets and work schedules

Tax forms

  • W-4 (withholding elections), W-2/W-3 (annual wage statements)
  • Forms 941/944 and 940 (federal employment tax returns)
  • NJ equivalents: NJ-927, WR-30, NJ-W-3

Payment confirmations

  • EFTPS deposit receipts, NJ EFT confirmations
  • Bank records showing payroll disbursements

Correspondence

  • All IRS and NJ Department of Labor notices, audit letters, penalty assessments, abatement requests

How long to keep records: Use a 7-year retention policy for all tax and payroll records. This exceeds both NJ’s 6-year standard and the IRS’s general 3-year audit window. Digital records are acceptable as long as they are legible, complete, and backed up securely.

How Do I Handle Payroll Taxes When Closing a Business in New Jersey?

Closing a business does not erase payroll tax obligations — it triggers a specific set of final filings that must be completed correctly.

State-level (NJ) final filings:

  • File final NJ-927 and mark it as your final return
  • Remit any outstanding gross income tax withholding
  • Settle final UI and DI contributions
  • File WR-30 for the final quarter
  • Formally close your SUI/SDI account

Federal-level final filings:

  • File final Form 941 (or 944) — check the “final return” box
  • File Form 940 (FUTA) — marked final
  • Issue final W-2s to employees promptly — do not wait until January if closing mid-year
  • File W-3 transmittal with the W-2s
  • Issue 1099-NECs to any contractors

Errors during business closure can create lingering personal liability for owners. Tomes Law Firm can guide you through a clean closure.

Are There Payroll Tax Credits or Incentives Available in New Jersey?

Yes. Hiring can be expensive, but certain programs offset the cost.

  • Work Opportunity Tax Credit (WOTC): Federal credit of up to $9,600 for hiring employees from eligible target groups (veterans, long-term unemployed, recipients of certain public assistance, etc.)
  • NJ Economic Incentives: New Jersey offers additional hiring credits and economic development incentives through programs administered by the NJ Economic Development Authority (NJEDA)

Properly claiming these credits requires documentation — and errors can invite scrutiny. Tomes Law Firm can help you claim what you’re entitled to while staying compliant.

Does NJ Composite Reporting Affect Payroll Taxes?

No. Composite returns (Form NJ-1080C) are a personal income tax convenience for nonresident partners, LLC members, and S-corp shareholders — not a payroll mechanism.

If you have employees working in New Jersey, you must still withhold and remit payroll taxes (NJ-927, WR-30) on their wages, regardless of whether your business files a composite return for nonresident owners. These are separate and independent obligations.

Work With a New Jersey Payroll Tax Attorney With 33+ Years of Experience

Payroll tax problems don’t solve themselves — and the longer they go unaddressed, the more expensive they become.

Frances Tomes, Esq. has helped New Jersey business owners navigate IRS audits, trust fund recovery penalties, missed filings, and state tax disputes for over 33 years. Tomes Law Firm’s mission is to provide high-quality, result-oriented legal solutions that address your problems before they become crises — and to serve as a true partner in every aspect of your financial life.

We serve clients throughout Freehold, NJ and a 35-mile radius including Monmouth County, Ocean County, Middlesex County, and surrounding areas.

Ready to Resolve Your Payroll Tax Problem?

Schedule an Appointment
Call: 732-333-0681
Contact Us

Tomes Law Firm, PC | 33+ Years Serving New Jersey Businesses | Freehold, NJ 07728