If you have small size business or midsize business payment of payroll taxes are very important.1.
What do we mean by Payroll taxes?
This includes any income withheld from the monthly wages of employee for income tax purposes including social security and Medicare tax. Employers are legally bound to withhold some part of the salary of the employee for payroll taxes to be placed in trust and later on to be forwarded to IRS.
Pay roll tax is considered as a trust tax and it is the liability of the employer to pay tax on behalf of the employee to the IRS from that trust .Failure to make payment is a serious offence and IRS can takes serious action for the nonpayment and they even shut down your business without providing you any opportunity of being heard. If any employer fails to withhold money or fails to have money in the trust to be sent to IRS, they acquire a pay roll tax debt.
Also Read: Understanding Employment-Taxes
If you have been contacted by any IRS official on this subject, do not talk to him directly even when you know the facts of the case, you have to take professional advice from qualified IRS tax attorney in Sacramento and we will solve your problem. Any single wrong reply from your side will lead to the closure of your business.
Being being an officer or director can land you in the hot seat. If you’re a responsible person the IRS can pursue you personally for payroll taxes if the company fails to pay. The 100% penalty equals the taxes not collected. The penalty can be assessed against multiple responsible person, allowing IRS to pursue them all to see who coughs up the money first. Responsible means officers, directors, and anyone who makes decisions about who to pay or has check signing authority.
When multiple owners and signatories all face tax bills they generally squabble and do their best to sic the IRS on someone else. Factual nuances matter in this kind of mud-wrestling, but so do legal maneuvering and just plain savvy. One responsible person may get stuck while another who is even more guilty may get off scot-free.
Meanwhile, the government will still try to collect from the company that withheld on the wages. The IRS also wants to make sure this kind of bad tax situation doesn’t occur again. The government can move to shut down the business so the situation doesn’t get worse. In extreme cases the government may seek criminal penalties.
Factual truth about payroll taxes: IRS Behavior
- These taxes are to paid within three days when they become due and extension in the time of payment can lead you in trouble.
- IRS is very serious about this subject than personal income tax cheatings. They work hard in finding the business organizations who are late in the payment of payroll taxes and it will become difficult to make settlement with them.
- IRS is least bothered that in the payment of these taxes your business suffers. Nonpayment of these taxes is theft in the eyes of IRS.
What happens when you miss one payment?
This will change your payment circle and you have not only to pay fine for missed installment but also for payment you make afterwards. This complicated situation is only solved by qualified income tax lawyers.
You must withhold these amounts from an employee’s wages. The law also requires you to pay the employer’s portion of two of these taxes: a 6.2 percent Social Security tax; and. a 1.45 percent Medicare tax (the “regular” Medicare tax).Feb 10, 2014
Factual facts of non-payment of payroll taxes on small business groups
Internal Revenue Services (IRS) is targeting small business groups who are in default in the payment of payroll taxes. Amount collected from payroll taxes goes to the government account and those who are not paying payroll taxes government considered them as defaulters, and they are initiating serious actions against them in the following shape:
- Small businesses more tax evaders: Tax enforcement teams are considering these organization as big tax evaders. They are not paying payroll taxes and IRS is serious about them. Even if the economy is in recession they are not giving their helping hand to government.
- IRS the most powerful authority: IRS has the power to completely wind up your well set up business within seconds. IRS collection officials are provided with vast power in collection of payroll debt in the shape of closing of the business without any court order. They have also the power to directly deal with the customers and collect money directly from them which they have to give to the business organization. Therefore it is advisable that you should pay your payroll taxes debt at the earliest before your business is completely winded up by the IRS collection officials.
- Non-filing of payroll taxes-big federal offence: Negligence in the payment or non filing of pay roll tax is a big federal offence. Your case can be forwarded to the Criminal Investigation division and from there to Department of Justice if IRS is successful in proving their contentions.
- Pay roll taxes is government property: Small business or midsize business owners are not allowed to borrow anything from payroll taxes as this is the government amount in the shape of contribution of this amount to the social security account and Medicare account of the the employees working in his organization. Social Security account and medicare account comes under the purview of government.
- IRS can approach trust fund recovery penalty: IRS has the power to directly approach the Trust Fund Recovery Penalty against owners and shareholders.
- Effect of Payroll tax penalties: If you are guilty of pay roll tax penalties, it can burden you with huge tax debts. Whatever penalties are discovered on the basis of unpaid payroll tax it will increase total tax bills and become the reason of losing your business.
Common question that may be asked in relation to above mentioned points:
How Do I Submit Payroll Taxes to the IRS?
I owe the IRS payroll taxes from my business. They are threatening me to shut my business down? What should I do?