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What is Payroll Tax Liability?
Payroll taxes differ from normal income taxes. Business owners are required to withhold the appropriate amount of income tax and other taxes from their employee’s paychecks and after collecting said taxes send them to the IRS and state. Employees complete a personal allowance worksheet so that employers can withhold the correct federal and state income taxes from each pay period. Employees rely on their employers exclusively to withhold the payroll taxes from their paychecks and send said monies to the IRS and the state through the appropriate channels. In addition to withholding employee taxes, the employer is obligated to pay 7.65% in employer payroll taxes (social security and Medicare).
As a company, you are entrusted with your employee’s money when it comes to paying payroll taxes. If you, the business owner or a responsible corporate officer fail to file your payroll tax returns and send the collected payroll taxes to the IRS and the state, you, as the business owner or a responsible officer, are considered by law to have committed a theft from your employees, that inevitably will result in aggressive collection actions by the IRS or the state. Failure to file your payroll tax returns and to pay your payroll taxes could be considered a federal offense under which the IRS could refer your case to the Criminal Investigation Division and the Department of Justice, and the penalties imposed can be enormous!
What are the Possible Consequences?
Tangible consequences could include the loss of your business, and the seizure of company property, including inventory, machinery, and other assets. Failure to pay business payroll taxes can, in rare cases, lead to criminal charges and the possibility that you could be convicted of a felony with a hefty fine and possibly a prison sentence. Cases in which the taxpayer could be convicted of a felony would include cases in which a business owner diverted the money for personal use, instead of for the sake of the business, such as paying off personal creditors. In the most severe cases, failure to pay your payroll taxes can result in jail time, and the payroll taxes and penalties are not dischargeable in bankruptcy.
How To Get Help?
Coast One Tax Group is up to date on current tax law and has a solid history of resolving payroll back taxes. Call our team of experts for a free consultation to learn about your options so that you are armed with all the information needed to make wise decisions when tackling this type of tax liability.