If you are a business owner, you are likely aware of the peaks and valleys in revenue that are inherent during the operation of the business. Because of these fluctuations, it is often tempting to delay paying bills and other obligations during times when revenue is down in order to keep your business afloat or pay other creditors. However, as the Justice Department reminded taxpayers earlier this year, one of the areas that you should never neglect to timely pay are quarterly payroll taxes.
Failing to file your required quarterly 941 return to the IRS can mean trouble for you and your business. Even though many types of business entities offer limited liability, this does not apply to payroll tax delinquencies. As a result, you as a business owner, as well as the officers, treasurers, bookkeepers, and other persons charged with withholding and accounting for payroll taxes, can be held personally liable for the unpaid withholdings (as well as incarceration and other criminal penalties). This is known as a trust fund recovery penalty.
Common problems with payroll taxes
A variety of transgressions can lead to trust fund recovery and other penalties including:
· Paying other creditors in lieu of payroll taxes
· Paying workers in cash without withholding taxes
· Misclassifying employees as independent contractors
· Failing to properly monitor outsourced payroll tax services (you can still be held liable for payroll tax delinquencies)
As taxes withheld from employees’ wages constitutes 70 percent of the annual revenue collected by the IRS, you can be sure that the IRS and Justice Department take noncompliance with payroll tax laws very seriously.
Due to the stiff penalties involved, if you are being investigated or audited for payroll tax issues, it is important to engage the services of a tax attorney as soon as possible. Representing clients nationwide, the experienced tax attorneys at Kundra & Associates PC can work aggressively on your behalf to protect your interests and obtain the most positive outcome possible.