10 Important Facts About Payroll Tax Problems
As a business owner or employer, it is your legal duty to pay payroll taxes on any and every employee you hire, including those that just work part-time hours. The IRS claims over $12 billion is left unpaid to them in payroll taxes every year, and they have a habit of being quite aggressive with payroll tax collections.
1. Payroll taxes are essential
No matter how you spin it, there is no exception for unpaid payroll taxes. As a business owner or employer, it is your responsibility to be aware of any and all payroll tax deposits that need to be made for your employees.
2. IRS collections can get aggressive
The IRS is especially aggressive about payroll taxes, and will go to great measures to make sure they receive their deposits. If all else fails, they will even send agents to your business to seize assets.
3. Payroll tax penalties add up quickly
Immediate late fines can add up quickly, and can end up costing you thousands in unnecessary fees. If you notice that you missed a payroll tax deposit then you want to make sure and pay it as soon as you can. If you fail to deposit the money with government for long enough they could issue a lien against your bank accounts.
4. Small businesses are watched closely
Unfortunately many small businesses feel they are "under the radar" and choose to put off or evade payroll taxes for that reason. Well think again, because the IRS has their eye on all small business owners, and works to enforce full payroll compliance on all businesses both large and small.
5. Borrowing from payroll taxes is highly illegal
Despite what you may have heard, in no instance are you allowed to borrow from payroll taxes instead of depositing them. Doing so often results in huge legal headaches, and huge IRS penalties.
6. You have to pay
There is no way to resolve payroll tax disputes without spending some cash. Lawyer fees, time off work, and any resulting fines will negatively affect you and your business. On top of all of this, do not forget the IRS has the right to lock your front doors without a court order, instantly putting you out of business for who knows how long.
7. No business structure is safe
Too many times people mistakenly select a structure for their business because they think it will keep them safe from IRS collection agents. However, no matter if you are a sole proprietor or the owner of an LLC, you will always be held responsible for unpaid payroll taxes.
8. Trust Fund Recovery Penalty
In order to encourage prompt payment of payroll taxes the IRS setup what is known as the trust fund recovery penalty (TFRP). Although technically a tax, the IRS calls it the TFRP because you technically hold the employee's money in trust until you make a federal tax deposit in that amount. Therefore, if you do not immediately pay these taxes on behalf of your employees then the IRS will assess the TFRP. Additionally, this penalty can be assessed on more then just the owner of the business. The IRS is allowed to penalize anyone authorized to sign and distribute payroll checks on behalf of the company.
9. 100% Penalty
When the IRS does assess the TFRP it will come with a horrendous 100% penalty. According to the IRS's website the amount of the penalty is "equal to the unpaid balance of the trust fund tax." Therefore, if you are $15,000 in debt from payroll taxes, they will charge you $15,000 on top of that, doubling your debt instantly.
10. Legal advice is a good idea
If you do get in to trouble with your payroll taxes, it is a good idea to get legal advice sooner rather than later. You could either seek advice from a local tax lawyer who specializes in payroll tax problem cases, or consult with a nationwide law firm like ours. Feel free to submit a contact request and one of our legal specialists will contact you as soon as possible to help resolve your IRS problems.
1. Payroll taxes are essential
No matter how you spin it, there is no exception for unpaid payroll taxes. As a business owner or employer, it is your responsibility to be aware of any and all payroll tax deposits that need to be made for your employees.
2. IRS collections can get aggressive
The IRS is especially aggressive about payroll taxes, and will go to great measures to make sure they receive their deposits. If all else fails, they will even send agents to your business to seize assets.
3. Payroll tax penalties add up quickly
Immediate late fines can add up quickly, and can end up costing you thousands in unnecessary fees. If you notice that you missed a payroll tax deposit then you want to make sure and pay it as soon as you can. If you fail to deposit the money with government for long enough they could issue a lien against your bank accounts.
4. Small businesses are watched closely
Unfortunately many small businesses feel they are "under the radar" and choose to put off or evade payroll taxes for that reason. Well think again, because the IRS has their eye on all small business owners, and works to enforce full payroll compliance on all businesses both large and small.
5. Borrowing from payroll taxes is highly illegal
Despite what you may have heard, in no instance are you allowed to borrow from payroll taxes instead of depositing them. Doing so often results in huge legal headaches, and huge IRS penalties.
6. You have to pay
There is no way to resolve payroll tax disputes without spending some cash. Lawyer fees, time off work, and any resulting fines will negatively affect you and your business. On top of all of this, do not forget the IRS has the right to lock your front doors without a court order, instantly putting you out of business for who knows how long.
7. No business structure is safe
Too many times people mistakenly select a structure for their business because they think it will keep them safe from IRS collection agents. However, no matter if you are a sole proprietor or the owner of an LLC, you will always be held responsible for unpaid payroll taxes.
8. Trust Fund Recovery Penalty
In order to encourage prompt payment of payroll taxes the IRS setup what is known as the trust fund recovery penalty (TFRP). Although technically a tax, the IRS calls it the TFRP because you technically hold the employee's money in trust until you make a federal tax deposit in that amount. Therefore, if you do not immediately pay these taxes on behalf of your employees then the IRS will assess the TFRP. Additionally, this penalty can be assessed on more then just the owner of the business. The IRS is allowed to penalize anyone authorized to sign and distribute payroll checks on behalf of the company.
9. 100% Penalty
When the IRS does assess the TFRP it will come with a horrendous 100% penalty. According to the IRS's website the amount of the penalty is "equal to the unpaid balance of the trust fund tax." Therefore, if you are $15,000 in debt from payroll taxes, they will charge you $15,000 on top of that, doubling your debt instantly.
10. Legal advice is a good idea
If you do get in to trouble with your payroll taxes, it is a good idea to get legal advice sooner rather than later. You could either seek advice from a local tax lawyer who specializes in payroll tax problem cases, or consult with a nationwide law firm like ours. Feel free to submit a contact request and one of our legal specialists will contact you as soon as possible to help resolve your IRS problems.
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