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 (832) 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.