Payroll Tax Issues
Common Payroll Tax Issues
1. Misclassification of Employees: Incorrectly classifying employees as independent contractors to avoid paying payroll taxes can lead to substantial fines and penalties.
2. Failure to Deposit: Employers must deposit federal employment taxes (income tax withheld and both employer and employee portions of Social Security and Medicare taxes) according to the required schedule. Missing deadlines or failing to deposit the correct amount can trigger penalties.
3. Inaccurate Reporting: Filing incorrect information on tax forms (like Form 941 for quarterly payroll taxes) creates issues. Errors might include wrong Social Security numbers, reported wages, or tax amounts.
4. Late Tax Returns: Late filing of payroll tax returns can also result in penalties and accumulated interest on any unpaid tax amounts.
Potential IRS or State Actions
- Penalties and Interest: The IRS imposes penalties for late payments, incorrect filing, and failing to deposit taxes. Interest on unpaid taxes continues to accrue until full payment is made.
- Trust Fund Recovery Penalty: This severe penalty can be imposed on individuals responsible for withholding and paying payroll taxes if they willfully fail to do so. It equates to 100% of the unpaid trust fund taxes.
- Liens and Levies: The IRS can place a lien on your property or levy your bank accounts if taxes remain unpaid.
Payroll Tax Issues are an Immediate Issue
Handling payroll tax issues proactively can save your business from severe penalties and financial strain. Reach out to us immediately if you believe you’re at risk or already experiencing problems with payroll tax issues.
