The IRS requires all employers to withhold certain taxes including Social Security, Medicare, and income taxes for all its employees and remit these as payroll taxes. Most businesses must make a federal tax deposit within a few days after the pay date of their payroll checks, so paying payroll taxes should be a critical part of routine operations for every business. However, some business owners mismanage these funds, fail to remit payments, and experience major payroll tax problems with the IRS.
When a business is lacking sufficient cash flows, it will sometimes use its payroll tax withholdings to pay its vendors and other business expenses. The thinking is that the cash flow crunch is a temporary problem. The business owner is hoping that by “borrowing” the payroll withholdings, a short-term solution has been found. However as is often the case, the temporary cash flow problems become more permanent and the unpaid payroll taxes have become a major headache for the business owner. These business owners don’t consider that the money withheld from an employee’s wages does not actually belong to the business at any time. In the eyes of the IRS, it’s their money and if you don’t hand it over promptly you’re basically stealing from them.
The IRS takes unpaid employment taxes very seriously and will aggressively pursue any business that fails to pay its payroll taxes on time. Failure to file and to pay your company’s payroll taxes can result in significant penalties. In fact, the IRS has one penalty that equals 100% of the taxes due. Penalties may be the least of your problems. If you owe delinquent payroll taxes and ignore the problem, the IRS could eventually shut down your business and sell off the assets to pay the taxes due. If the business cannot pay the taxes due, the IRS will go after any individual it deems to be a responsible person. That’s right, the IRS can collect the payroll taxes due from any officer, employee, even the company’s bookkeeper, if the IRS deems those individuals to be a responsible person. And the IRS’s determination of who are responsible persons is quite broad. The IRS will usually find that several persons within a company are responsible persons. Furthermore, since the withheld funds belong to the IRS, failure to pay these taxes is considered a form of theft. The world’s most powerful collection agency may file criminal charges against you which could include imprisonment.
If you owe payroll taxes, you might not hear from the IRS right away. But make no mistake, the IRS will take notice and the penalties will compound quickly and so will its collection efforts. If your business has fallen behind on employment taxes, call Keystone Financial Solutions, P.C. and get the payroll tax help you need today. We offer many tax relief solutions for payroll tax problems including: