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Payroll or Employment Tax Liability

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 to 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.

Payroll or Employment Tax Relief

Occasionally, business owners find themselves in a situation where they have acquired payroll or employment tax liability. There are tax laws that business owners are required to follow, in regards to their business and any employees they may have.  It is important to understand the difference between payroll taxes and other taxes.   Payroll or employment tax liability is different than income tax liability. Recognizing the differences and understanding the requirements of these laws will allow for strategizing the best plan to pay off any business payroll or employment tax liability.

Each pay period, business owners are required by law to withhold the appropriate amount of taxes (Social Security, Medicare and income taxes) from an employee’s wages. It is important that this withheld money/tax is submitted or deposited with IRS on behalf of the employees. Employees rely on their employers to handle this matter in accordance with the law. Not doing so is considered theft and legal action can be pursued. In addition to the taxes that have been withheld from the employee, the employer is responsible for paying the IRS the employer matching tax rate, which is the employer portion of the payroll taxes, including Social Security and Medicare taxes.

The employer is also responsible for submitting or paying Federal unemployment (FUTA) tax to the IRS. Only the employer pays the FUTA tax and it is not deducted from the employee’s pay. This amount is based on the number of employees that work at the business. Federal unemployment (FUTA) taxes are submitted at the end of the year or annually, while employment payroll taxes typically are filed and submitted to the IRS quarterly. Penalties may be added, and collection actions can be taken for all unpaid payroll or employment tax liability.

If an employer fails to properly file or deposit payroll taxes to the IRS, the employer will begin to accumulate payroll or employment tax liability. Within a period of time, aggressive action can be taken by the IRS to collect payroll or employment back taxes. The unpaid tax liability may grow quickly as penalties and fees are also added. These fees can rapidly increase over a short period of time, possibly faster than they would for unpaid personal taxes. The longer it takes to pay the tax liability, the bigger the tax bill can get.

In addition to penalties and fees, the IRS may possibly file criminal charges for not paying payroll tax liability. The IRS can refer the case to the Criminal Investigation Division and the Department of Justice. If this occurs, the consequences could be severe. Depending upon the outcome of the investigation, the individual may even face jail time. This is rare, but it can happen depending on the circumstances of the case.

Unpaid employment tax liability does not go away. Even if the business faces financial hardship, it is not dischargeable in a bankruptcy. However, there are other options available to get help with resolving business payroll or employment tax liability and consulting a tax relief firm with solid experience is essential.

It is in the best interest of the government to get business owners to pay back the money owed. The IRS is willing to work with the business owners to get that liability paid off but navigating these laws and unique circumstances may be difficult without professional guidance. Depending upon how much is owed and the circumstances of the case, it may be possible to settle for less. This may include establishing a payment plan to pay the employment back taxes, so that the business can remain operational.

Some business owners may not be prepared or have financial means to pay their back tax liability in full and many may not know where to start. Understanding employment tax laws may be challenging. It may benefit business owners with payroll or employment IRS tax liability to hire a tax professional. The tax relief experts at Coast One Tax Group are able to provide guidance, skillfully navigate through the IRS regulations and negotiate the best possible resolution option available.