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.
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