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Posted on August 15, 2018

employee payroll

Is your small business processing payroll taxes correctly? It’s important to be sure. Making a mistake can be costly and get you into hot water with the IRS. Payroll tax problems can trigger an audit and, in some cases, even cause your business to be shut down. There have been numerous cases where the IRS has launched a federal investigation, resulting in jail time for small business owners. Avoid these worst-case outcomes by informing yourself about payroll tax regulations.

What’s Defined as Payroll Taxes?

The IRS defines payroll taxes as the duo of Social Security and Medicare taxes, also known as FICA taxes, which are withheld from employee paychecks. People sometimes confuse payroll taxes with employment taxes, which are technically something different, and include federal taxes, unemployment tax and self-employment tax. Generally, when someone refers to payroll taxes, they mean FICA taxes.

What’s the Biggest Risk to My Business?

Paying late – or not at all – is a big problem. Past due payroll taxes are a major enforcement issue for the IRS, which actively targets small businesses for compliance. If there’s one thing you shouldn’t do, it would be to ignore payroll taxes or flagrantly pay them late. More than 40% of small businesses are fined an average of $850 per year for payroll tax issues, primarily for late payment.

What Power Does the IRS Really Have?

Make no mistake – the IRS has wide authority to track down and penalize payroll tax evaders. Not paying your payroll taxes is a federal crime. If you don’t pay, the IRS can:

  • conduct an audit
  • assign financial penalties
  • confront you at your business
  • padlock your front doors
  • seize machinery and equipment
  • contact your customers
  • prevent your business from operating
  • notify the Department of Justice
  • work with authorities to secure jail time for the business owner

What if We Already Have Past Due Payroll Taxes?

Act fast to resolve it. Just 16 days past the due date, the IRS can assign a penalty of a whopping 33%. Also, don’t waste time trying to explain it away with excuses; the IRS isn’t very flexible on this issue. Some small businesses try to justify nonpayment by saying they used payroll tax money to cover their operating expenses. This is against the law, because that money is owed to the federal government. Instead, work proactively with a tax attorney to sort things out with the IRS as quickly as possible.

Dutton Legal Group – Indiana’s Tax Resolution Law Firm

The Dutton Legal Group helps the people and businesses of Indiana navigate ever-changing State and Federal tax codes. Our goal as experienced tax attorneys is to assist you in finding an immediate, cost-effective answer to your tax challenges. We provide a variety of tax services from balance resolution and return preparation to wage garnishment relief and audit assistance. Make Dutton Legal Group your next call at 1-800-334-0255 or send an email to request a free consultation. Trustworthy and affordable, for over 15 years.