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 could be subject to penalties, criminal investigation, and tax debt.
Small 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. For this reason, the Internal Revenue Service (IRS) targets these business owners, especially during critical economic times.
What can happen if you have such problems?
If there are issues with your business’s tax payments, the repercussions can be detrimental, especially if the Federal Government takes on the extreme version of tax compliance enforcement.
Closing Down Your Business
Firstly, the IRS is exceedingly powerful, and if it becomes aggressive, it can take extreme measures, including locking your business’ doors and shutting down your business’s operations. Unfortunately, they can do so without getting it approved through a court order. They can seize or confiscate your equipment and machinery, and they can even divert your account receivables towards themselves. Seeing that the IRS has so much power and that it will use it against those who do not file appropriately or deposit or pay their taxes, dealing with payroll tax problems promptly becomes essential.
Hefty Tax Bills
Secondly, another thing that can become a problem is the fines and the penalties associated with payroll tax issues. These fines and penalties can continue adding up into large amounts, and a hefty tax bill is the last thing you want for your business. The three penalties that you would need to worry about if you do not solve your payroll problems are:
- Failure to File – If you misreport or do not fill out your tax forms relating to payroll taxes at all, then you may be subject to this penalty
- Failure to Deposit
- Failure to Pay
This all can collectively add up to 33% plus interest, which can become too much to afford depending on your business’s conditions. 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. It is common practice for many Small and Medium-size Businesses to do so in a business’ operating expenses. Still, it is to be understood clearly that money collected for withholding tax, Federal Insurance Contributions Act tax (FICA), and Medicare and Social Security do not 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 penalize you can send shivers down one’s spine.
What do you need to do?
If you are going to be audited or owe payroll taxes, it is recommended that you talk to a professional accountant. It can be problematic if you do not have expert help; imagine being without a lawyer in a courtroom. It would 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.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.