Let’s face it, companies can get overwhelmed with the day-to-day business functions and forget to complete tasks such as remitting payment for payroll taxes. These things happen and payments can be made late, but it is important to stay on top of your company’s taxes to ensure larger consequences do not arise. A recent article published by the Journal of Accountancy, touches on the penalties of not paying payroll taxes.
By law, employers are required to withhold federal income and payroll taxes from their employees and remit these holdings to the IRS. These withheld taxes are referred to as “trust fund taxes”. As defined by the U.S. Code Section 6672, “Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax…shall…be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.” These tax penalties can result in fines up to $10,000, five years in prison, or both.
The IRS will aggressively seek out these payments when delinquent and can result in penalties pertaining to the business, owners, and those employed with a business that can be found as a “responsible person”. See the IRS description of a responsible person. The IRS does offer options to help employers avoid trust fund liabilities such as:
- Penalty relief
- Installment payments
- Appeals processes
Keep in mind these options help to alleviate the burden of costly fees and penalties or worse jail time; however, they also can be very time consuming, complicated, and expensive. Your best bet for avoiding trust fund penalties is to withhold and remit payment of the federal income and payroll taxes to the IRS in a timely manner.
Never fear, there is support to ensure you remain compliant with your corporate taxes. Check out our recent blog on “Outsourcing Payroll: Professional Payroll Management & Why It Pays” for a free eBook on the benefits of outsourcing your payroll and taxes. If you would like more information on how your company can avoid costly fees and penalties in regards to tax payments, feel free to contact us at [email protected].
Photo Credit: Tax Credits