Risks

• Employers who are strapped for cash may pay their employees but forgo making employment tax payments with the intention of paying the government back later or keeping the money for themselves. The IRS takes the matter of employment tax non-compliance very seriously. Employers face penalties and fines. The IRS can also use audits and levy tax liens on the property of business owners, officers or any employee of a business through the Trust Fund Recovery Penalty.
  
  

Liabilities

• Penalties and interest will continue to accumulate the longer employment taxes remain unpaid, putting the business in a deeper hole and affecting cash flow. Even if the business files for Chapter 7, its owners are still held liable for employment taxes; such taxes cannot be discharged even in personal bankruptcy. The IRS can still levy tax liens, garnish wages and freeze bank accounts. Tax liens become public information.
  
  

Considerations

• If a business cannot pay employment taxes, the best course of action is to contact the government agencies right away to work out a payment plan. Business owners may also want to consider obtaining a line of credit with their bank. Finally, having difficulty making payroll may be a sign that the business cannot afford to keep all of its employees and may have to go through layoffs.