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IRS written on a paper. Financial concept.
Many believe that the IRS is not as fast as it pretends to be. It can take years and years for them to actually catch on and do something about unpaid income taxes. That’s only when they realize that there is a problem that needs to be answered. After that, it may take a few more months or maybe years to take action. With payroll taxes, it’s a different story entirely.

Payroll tax problems can get you and your business in great trouble. For some reason, the IRS is extremely agile when it comes to coming down on businesses with payroll tax problems. The worst part is, it is not easy to get away with. The IRS can actually shut your business down and liquidate all of the assets. Very few businesses get the chance to pay the due amount or penalties.

IRS is Not a Lender – Tax is Not Your Bank Payment

Come to think of it, a lot of tax-related issues will be resolved if people stop thinking of the IRS as a bank. Owing the IRS is not similar to owing a lender or bank. The IRS is a federal body and it has the right, granted by the government, to reach into your account and take the money you owe them and maybe even more. More importantly, the will not just take the money you have in the bank. Everything you own, including your 401k, cars, home, accounts receivables, and the value of your life insurance is at risk. In the case that you are found guilty of tax evasion, you will end up in jail.

What Can Happen If You Fail to Pay Payroll Taxes?

When we say the IRS can shut down your business, we mean putting padlocks and chains on the doors. The IRS even has the right to do it with no court order. And, there is no way you can evade them by using bankruptcy as an excuse. Everyone, from owners to partners and CEOs, is held liable for the offense. All of your personal assets are seized. If they manage to find any evidence of willful tax evasion or fraud, your payroll problem will turn into a federal crime.

The Possibility of Being Held Responsible

When stuck with payroll tax problems, your first instinct should be to clear the two-pronged test by the IRS. It is a test devised to determine who is responsible for the problem. First, they need to know if it was your duty to account for and pay payroll taxes. Second, they need to know if the failure was deliberate.

There have been cases where a company’s accountant or bookkeeper was held responsible. It is why it is very important to hire reliable CPA’s, bookkeepers, and accountants.

Why Is the IRS So Serious About Payroll Taxes?

Unlike your taxes, payroll taxes are trust fund taxes. It is the money others have entrusted you with. Not paying that money to the IRS is just like stealing money from your employees and the IRS at the same time. It is an employer’s job to pay an employee’s income tax as well as their FICA. The IRS doesn’t consider it your money. It considers it your employer’s money. Not delivering it to the intended authority is theft. Due to this reason, the IRS is quick to shut down businesses because of payroll tax problems.

The only way to get out of a payroll tax problem is to hire a good attorney. However, prevention is much more effective than any solution. So, hire a CPA and bookkeeping firm that can help you with your taxes before you are having to do any damage control.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

women using calculator calculated individual income tax for pay taxes annual.
Past due payroll taxes can cause a lot of problems for you and your business. Because of the increased efforts to enforce tax compliance, there is a threat of your business being shut down and you being subject to penalties, criminal investigation, and tax debt.

Smaller businesses have a higher chance of being subject to this tax compliance because they are the largest group suspected to be responsible for tax avoidance and evasion. It is for this reason that the IRS targets these business owners, especially during critical economic times.

What can Happen if you have Payroll Tax Problems?

If there are issues in the tax payments of your business, the repercussions can be detrimental, especially if the Federal Government takes on the extreme version of their tax compliance enforcement.

Closing Down Your Business

First, the IRS is extremely powerful and, if it becomes aggressive, it can do a lot from locking your business’ doors and shutting down the operations of your business. Plus, they can do that without getting it approved through a court order. They can seize or confiscate your equipment and machinery and even divert your account receivables towards themselves. Seeing that the IRS has so much power and that it will use it against those who don’t file, deposit or pay their taxes, dealing with payroll tax problems promptly becomes necessary.

Hefty Tax Bills

Another thing that can be a problem for you are the fines and the penalties; these can continue adding up to turn into very big amounts. A hefty tax bill is the last thing you want for your business. The three big penalties that you would need to worry about if you don’t solve your payroll problems are:

  1. Failure to File
  2. Failure to Deposit
  3. Failure to Pay

This all can collectively turn into 33% plus interest which can become too dependent on the conditions of your business. Inability to pay these tax bills may lead to confiscation of assets or, worse, closure.

Federal Crime

Not properly filing or paying your taxes, including those concerning payroll, constitute a crime against the federal government. Your case can be put forward to the Criminal Investigation Division leading to a case referred to the Department of Justice if the IRS can prove that you intentionally avoided and evaded taxation.

Furthermore

It is illegal to use the money taken on behalf of payroll. In a business’ operating expenses, it is common practice for many small and medium-sized businesses to do so. However, it is to be understood clearly that money collected for withholding tax, FICA, Medicare, and Social Security doesn’t belong to the business and must be paid to the government. Ideally one must make a tax deposit 3 days after the payroll checks are issued.

 The IRS can come after individual owners and shareholders for unpaid payroll taxes. It has access to the Trust Fund Recovery Penalty (TRFP) which it can use against shareholders and owners. Even the thought of the IRS being able to snatch you behind the protective cover of the ‘corporate veil’ can send shivers down one’s spine.

What do you need to do?

If you’re going to be audited or if you owe payroll taxes, it is recommended that you talk to a professional accountant or bookkeeper. It can be really problematic if you don’t have expert help, imagine being without a lawyer in a courtroom. It will be a lot easier to face an audit or handle a non-payment if you have the services of a Tax Attorney or a Certified Tax Resolution Specialist.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.