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Payroll Tax Matters

When you run a business and employ workers, you are responsible for handling payroll taxes. You need to deduct your employees’ taxes from their salaries and pay them to the IRS in their name. At the same time, there are proportionate amount of taxes you need to pay as a business for each of your employees.

Any delay or failure to pay due taxes will introduce interest and penalties which will grow over time. The IRS is more strict with companies than it is with individuals. It may take time before the agency knocks on the door. But eventually, they will and the business will have to face a heavy financial burden.

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The IRS holds businesses to a higher standard

Payroll tax payments are monitored strictly and there is little tolerance for offenders

Indeed, while some individuals may get away with small tax misdemeanors, businesses almost never get such a chance. The IRS chases payroll taxes much more aggressively.

Companies are required to collect the appropriate amount of taxes from their employees and hold them in a Trust Fund.

These include:

  • Federal and state income taxes
  • Social Security
  • Medicare
  • Unemployment taxes
  • Local taxes (city, county tax; disability tax, etc)
  • Employer’s share of all appropriate workers’ taxes

Businesses need to make quarterly payments to the IRS and submit a number of reports and forms throughout the year to account payroll taxes. Procedures for businesses are more complex and they are required to provide a lot more information than individuals.

At the same time, the IRS is more strict and rarely provides the benefit of doubt. When a company doesn’t submit the proper financial statements during the expected window, the IRS will initiate a series of letters and notices. The business will be given the chance to comply voluntarily.

Even if you’re behind on your taxes, we strongly advise to heed the warnings of the IRS and make at least partial payments. This will prove to the agency that you don’t intend to avoid your taxes, just experience financial problems. The interest and fines for delayed payments are considerably smaller than those that follow failure to pay.

Consequences of not paying payroll taxes

Ignoring the IRS will result in a financial penalty and interest over the owed taxes. Due taxes are owed forever and interest runs indefinitely. So, it’s easy for small payroll tax problems to snowball and outgrow the original tax that was owed.

Payroll tax penalties include:

Failure to prepare correct W-2 forms and file them by the end of January - fine of $50 for each missing or incorrect document.

Failure to submit appropriate tax forms, like Form 941 - fine of up to 15% for delays upwards of 16 days.

Failure to pay payroll taxes when due (Trust Fund Recovery Penalty) - fine of 100% on top of all unpaid taxes.

Eventually, the IRS will stop sending letters and proceed to impose liens and levies on the company’s assets. Liens can prevent you from accessing financial services. Levies will forcibly collect your financial assets, business equipment, and company fleet in order to cover your debt.

Any hardship that caused the business to neglect payroll taxes will grow even worse. Forced collections can disrupt your day to day operations, cause cash flow problems and even prevent you from offering your products or services. If your company has evaded paying payroll taxes for too long or has committed crimes, the IRS can put you out of business.

At this stage, you need to negotiate with the IRS and explore solutions that allow you to make payments and keep enough capital to remain operational.

We recommend consulting a licensed tax attorney before speaking to the IRS. A tax attorney will evaluate your case and hopefully propose a solution to some of the charges.


Get your business on track with the IRS

At Daily & Toups, we’ve handled hundreds of payroll tax cases. With more than 50 years of experience practicing tax law, we’ve gained in depth knowledge about the IRS and their practices.

Allow us to take over your defense and negotiate with the IRS for a fair resolution. We will work to remove any liens and levies imposed by the agency first. You will have to pay off the payroll taxes you owe one way or another. Our goal will be to agree a custom payment plan with the IRS which will respect the needs of your business and leave you enough cash flow to conduct your daily activities and remain operational.

Contact us for a free consultation and advice. We will assess your situation and provide options for resolving the problem. We’ll use all available leverage to reduce the penalties imposed by the IRS and help you save your business.

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Hear from some of our clients

I've had the pleasure to work with Mr. Daily for over 20 years, and he has always found the time to counsel and explain the best course of action.

JG | tax law assistance and counsel

Mr. Daily helped me get out of a tax situation that could have forced the dissolution of my business and ruined my credit.

Anonymous | Representation and defense in front of the IRS

Fred assisted us through a multi year audit with ease and professionalism. His guidance was excellent and it was obvious he knew exactly how to handle the IRS

Richard | Multiyear tax audit defense

Thank you. Thank you. You got the tax lien removed and I was able to get my home re-financed.

Stephan | Removal of erroneous federal tax lien

Two years ago my finances (and life) were a mess. The IRS was on my back with tax levies of my bank accounts. Today, all of that is behind me. I can sleep at night.

Seraphina | IRS debt reduced from $200,000 to $14,700

The accountant that you warned me against tried to create endless fear as an incentive to hire him. You then helped me through the process of getting back into the tax system and not worry.

Sharon | 12 years non-filing of tax returns

Fred, I believe you function as part attorney, part therapist. You really do care about your clients.

David | IRS business audit appeal case