Don’t underestimate the seriousness of failing to pay your employees’ payroll taxes. This negligence can lead to severe consequences, including jail time for employers. That’s why it’s crucial to approach a tax problem as a legal problem and seek the assistance of an experienced tax attorney. If you find yourself falling behind on payroll taxes for any reason, it’s time to get in touch with Bryson Law Firm, L.L.C. for a free initial consultation. Addressing the issue promptly is essential to prevent any further complications.
Understanding Payroll Taxes and IRS Forms
Payroll taxes encompass the funds employers pay to the IRS as part of their employees’ salaries. It is mandatory for every employer to withhold these taxes, which include income taxes, Social Security, and Medicare contributions. Employers are also required to provide matching funds for their employees’ Social Security and Medicare, as well as contribute towards workers’ compensation and unemployment benefits. Additionally, employers must file various payroll tax forms, such as the Employer’s Quarterly Federal Tax Return and the Employer’s Annual Federal Unemployment (FUTA) Tax Return.
Failure to timely file these forms and pay the associated taxes puts your company in the spotlight for IRS scrutiny. Payroll tax issues are prioritized by the IRS over income tax problems due to the significant impact they have on employees. Failure to comply with payroll tax obligations can deprive employees of future Social Security and Medicare benefits. The IRS also considers non-payment of these taxes as a form of theft from employees.
Another aspect that requires careful attention is the correct classification of individuals as independent contractors. Misinterpreting a person’s classification can have implications for the payment of their FICA taxes. According to the IRS, an independent contractor is someone who completes work independently, without direct employer supervision.
Determining Responsibility for Payroll Taxes
The IRS extends the definition of responsible parties to include not only business owners but also individuals with check-signing authority. Even if an owner delegates tax payment responsibilities to someone else, such as an accountant, they can still be held accountable for any missing payroll taxes.
Consequences of Failing to File Payroll Taxes
Neglecting your company’s payroll tax obligations can result in severe penalties. The IRS can impose fines of up to 15 percent for simply failing to file payroll taxes. However, the most significant penalty the IRS can levy is the Trust Fund Recovery Penalty (TFRP). The responsible parties may be held liable for 100 percent of the outstanding taxes through this penalty. Additionally, the IRS adds interest starting from the due date, which can accumulate significantly. Some business owners have been required to pay millions of dollars in back taxes and interest, and this tax bill remains even in the event of bankruptcy.
If the IRS can prove willful failure to pay payroll taxes, such as diverting the funds for personal gain, the penalties become even harsher. In such cases, the person responsible may face felony charges, leading to fines of up to $10,000 and/or up to five years of imprisonment.
Resolving Back Payroll Taxes
As evident from the potential consequences, falling behind on payroll taxes can have a devastating impact on your company and even force its closure. To address these issues, several options can be pursued for reaching a resolution with the IRS regarding your back payroll taxes. These options include negotiating an Offer in Compromise or an Installment Agreement. Bryson Law Firm, L.L.C. has achieved successful outcomes for clients by settling payroll tax cases through large Penalty Abatements.
Failing to pay your payroll taxes is one of the most detrimental actions for the viability of your company. You can be held personally liable for the entire tax bill. If you find yourself delinquent on your payroll taxes, it is crucial to seek the guidance of a tax attorney who can navigate the complex nature of these taxes. Contact Bryson Law Firm, L.L.C., and arrange a free initial consultation with one of our experienced tax attorneys. We are here to help you navigate the maze of payroll taxes and find the best possible resolution.
