As a small business owner, you know firsthand the financial pinch that comes from having to budget for employment taxes. As your focus is on the bottom line of your business, it can be easy to fall behind on these taxes if you are not careful.
One of the more serious mistakes employers make regarding employment taxes occurs when they fail to account for and pay over to the government taxes withheld from employees’ paychecks. Many business owners justify doing this because they are short on income. Thus, they think it is okay to dip into these withholdings to fund business operations, hoping that a future increase in cash flow will allow them to pay their employment tax obligations, as well as the substantial interest and penalties that the IRS tacks on, at a later time. Unfortunately, the financial situation of the business does not always improve, creating a sticky situation for the owner and the officers of the business.
If you have been guilty of this, up until recently the IRS generally would not become aware that your business was behind on its employment tax payments until it received a return showing the deficiency. However, a new initiative from the IRS will make this phenomenon a thing of the past.
The IRS recently announced its Early Interaction Initiative. Pursuant to this initiative, the agency will actively monitor deposits to identify employers whose employment tax payments have declined or are received late. If your business is in this situation, you may start receiving letters or phone messages from the IRS to remind you of your tax obligations. In some cases, the IRS may send a revenue officer to your place of business.
Speak with an attorney
The new initiative makes it more important than ever to stay on top of employment and payroll taxes. Since becoming delinquent on employment taxes can mean that you and your officers, directors and shareholders could also be jointly and severally liable for the back employment taxes (not to mention possible jail time), it is vital to consult with the experienced tax attorneys at Kundra & Associates if your business is being investigated or audited for this problem. Our attorneys will work on your behalf to protect the best interests of your business and take all steps to minimize the negative repercussions.