Employers are expected to take care of payroll taxes in accordance with the law. When that doesn’t happen, the employer can face serious tax issues. Payroll taxes can quickly escalate because employers must hold certain taxes in trust for the government. This includes federal income, Social Security and Medicare taxes. If they aren’t deposited on time, the Internal Revenue Service (IRS) may take action.
Facing issues regarding payroll taxes usually involves considerable pressure to get the matter taken care of. Understanding the severity of this matter is critical.
Reasons businesses fall behind
Falling behind on payroll taxes can occur for many reasons, such as cash flow problems, bookkeeping errors or missed deposit schedules. Even if the reason for the delay is unintentional, the balance owed to the IRS will continue to increase.
When the missed deposits aren’t addressed, the IRS will send out notices and may scrutinize the business. It can also issue penalties, liens and levies. In many cases, the IRS will look for who to hold responsible for the unpaid taxes. This can include owners, officers, bookkeepers, managers and anyone else who has any measure of control over the finances of the company.
The IRS doesn’t treat missing payroll taxes like other business debt. Instead, they may turn to the Trust Fund Recovery Penalty to recover what’s owed from the individuals held responsible.
Reducing escalation
One of the most important steps for the business to take is to find out what quarters are unpaid. Determining if returns were filed and the amount that’s owed must be a priority. IRS transcripts, payroll records, copies of filed forms and bank statements can all help to determine how to proceed.
It’s critical that you don’t continue to miss deposits, even when you’re in the process of taking care of missing deposits. The IRS offers a host of options, including full payment, installment agreements and penalty relief. Determining how to get the payroll taxes current is critical, so it may be beneficial to work with someone familiar with these matters.