Past due payroll taxes can cause a lot of problems for you and your business. Because of the increased efforts to enforce tax compliance, there is a threat of your business being shut down and you being subject to penalties, criminal investigation, and tax debt.
Smaller businesses have a higher chance of being subject to this tax compliance because they are the largest group suspected to be responsible for tax avoidance and evasion. It is for this reason that the IRS targets these business owners, especially during critical economic times.
What can Happen if you have Payroll Tax Problems?
If there are issues in the tax payments of your business, the repercussions can be detrimental, especially if the Federal Government takes on the extreme version of their tax compliance enforcement.
Closing Down Your Business
First, the IRS is extremely powerful and, if it becomes aggressive, it can do a lot from locking your business’ doors and shutting down the operations of your business. Plus, they can do that without getting it approved through a court order. They can seize or confiscate your equipment and machinery and even divert your account receivables towards themselves. Seeing that the IRS has so much power and that it will use it against those who don’t file, deposit or pay their taxes, dealing with payroll tax problems promptly becomes necessary.
Hefty Tax Bills
Another thing that can be a problem for you are the fines and the penalties; these can continue adding up to turn into very big amounts. A hefty tax bill is the last thing you want for your business. The three big penalties that you would need to worry about if you don’t solve your payroll problems are:
- Failure to File
- Failure to Deposit
- Failure to Pay
This all can collectively turn into 33% plus interest which can become too dependent on the conditions of your business. Inability to pay these tax bills may lead to confiscation of assets or, worse, closure.
Not properly filing or paying your taxes, including those concerning payroll, constitute a crime against the federal government. Your case can be put forward to the Criminal Investigation Division leading to a case referred to the Department of Justice if the IRS can prove that you intentionally avoided and evaded taxation.
It is illegal to use the money taken on behalf of payroll. In a business’ operating expenses, it is common practice for many small and medium-sized businesses to do so. However, it is to be understood clearly that money collected for withholding tax, FICA, Medicare, and Social Security doesn’t belong to the business and must be paid to the government. Ideally one must make a tax deposit 3 days after the payroll checks are issued.
The IRS can come after individual owners and shareholders for unpaid payroll taxes. It has access to the Trust Fund Recovery Penalty (TRFP) which it can use against shareholders and owners. Even the thought of the IRS being able to snatch you behind the protective cover of the ‘corporate veil’ can send shivers down one’s spine.
What do you need to do?
If you’re going to be audited or if you owe payroll taxes, it is recommended that you talk to a professional accountant or bookkeeper. It can be really problematic if you don’t have expert help, imagine being without a lawyer in a courtroom. It will be a lot easier to face an audit or handle a non-payment if you have the services of a Tax Attorney or a Certified Tax Resolution Specialist.
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