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!