Payroll taxes can be complicated for any business, but they’re even more complex with a lot of employees. You also have more complicated obligations if you pay contractors, have overseas employees, or employ people in multiple states. Employers are required by law to withhold part of their employees’ paychecks to make state and federal tax payments. If you aren’t compliant with the latest rules and regulations, you could run into serious problems.
Some businesses must make their tax deposits a single day after sending out paychecks. Others might have extra time, or they might be required to make quarterly payments instead. Failing to keep up with payroll taxes can result in penalties and interest fees. As time goes on, the penalties will add up, until they might be greater than the sum of the delinquent taxes.
Payroll tax problems can occur in any business, no matter the size or the industry. They also aren’t always due to malice. In fact, most issues arise because of extenuating circumstances, or because of mismanagement leading to insufficient funding.
Some businesses don’t have enough money to make their overhead costs, so they use the payroll tax fund to keep the lights on. You might worry that you’ll lose your company if you’re unable to pay for rent or supplies. In comparison to the threat of closure, the IRS seems like a distant issue. After all, consequences from the IRS will not be as immediately apparent as consequences from your landlord.
In a lot of cases, a business owner believes that they will be able to pay their back taxes by the time they’re noticed by the IRS. But that usually isn’t the case. If you’re struggling so much that you have to choose between rent and taxes, your business is in dire straits. It’s likely to get worse, not better, as time goes on.
If you continue to avoid paying your payroll taxes for significant periods of time, the IRS might threaten to close your business. In addition, the business owner might be subject to criminal penalties including imprisonment and additional fines. Criminal proceedings are typically initiated when the IRS has sufficient evidence that the business owner intended to defraud them.
Payroll tax issues also aren’t always the fault of the business owner. Sometimes employees are dishonest about their tax obligations, or they make simple mistakes. They then hide the mistake from their employer instead of fixing it. In these cases, the business owner is still required to pay the owed taxes. However, because the issue was not the business owner’s fault, it’s possible that a tax attorney can get your penalties and interest reduced.
In most cases, when a business owner has payroll issues with the IRS, they will also have payroll issues with their state. California has one of the highest income tax rates in the US. Regulations regarding California payroll tax are very similar to the regulations at the federal level, though there are some differences. A good tax attorney will be well versed in both state and federal tax law.
The IRS is able to use functionally endless resources to pursue payment from you. They can seize your personal property and file criminal charges. When you’re dealing with the might of an institution like this, it’s vital that you know your rights. Having a tax attorney to represent you is one of your most fundamental rights.
Some people might want to file for bankruptcy to avoid paying overdue payroll taxes. It’s true that individuals can start bankruptcy proceedings in order to declare that they can’t pay their back taxes. But businesses don’t have the same exact protection. The IRS might collect part of your past payroll taxes from your personal account, even if the business is a corporate entity. Sometimes the IRS will collect taxes from your employees and contractors, too.
You can talk to a lawyer about how to avoid this. The specific code is called the trust fund penalty. It essentially states that the IRS can use the funds of individuals connected with a business to collect taxes if the business fails to pay them.
Your lawyer will be able to review the financial records of your business. Every payroll tax problem is slightly different, so you will need to consult with an attorney to learn about your options. They will be able to advise you about what your liability is, what they can do to lessen the penalties, and if there are any other potential consequences.
An attorney is the best person to talk to if you want to find out how to reduce your liability and avoid criminal charges. If your unpaid taxes are the result of employee misconduct rather than your own mismanagement, your lawyer may be able to factor that into a judgment. Making partial payments is a good way to avoid having the IRS seize your personal assets because of your overdue business taxes.
Regardless of how many employees you have, payroll tax issues can snowball into a frightening ordeal. Getting in contact with an attorney as soon as possible is the most important step.
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