For all types of small businesses, payroll tax is a subject worth taking seriously. It is entirely possible that letting these taxes pile up can cause you to lose your business. In certain cases, it can actually cause you to lose your freedom as well. Severe penalties for those who don’t pay their taxes has now become the norm. If you fail to keep up with the payroll side of taxes, your small business will quickly become derailed.
Here are some things that small businesses need to know about payroll taxes:
- The taxes can add up very quickly: The tax debt you can generate can add up very quickly and aggressively. Failing to file, failing to make deposits, and failing to pay are all separate penalties you can incur. Furthermore if you fail to pay up in just 16 days and then you file, you can be looking at 33 percent plus interest.
- You can easily lose your business: IRS collection strategies are vicious. In fact, in terms of collecting taxes, their authority is absolute. They don’t need a court order to lock your business doors and can even intercept payments from customers.
- It can become a federal crime: It doesn’t take very much for the IRS to decide that you are intentionally avoiding them. Accordingly, that puts you into the hands of entities like the Department of Justice, making your failure to file and/or pay a federal crime.
- “Borrowing” is against the law: Money taken from employees for things like federal-withheld tax, FICA, as well as Social Security is not owned by the company. Therefore, it must be accounted for, and it must be presented to the government. Federal tax deposits should be made within three days after the payment date of a payroll check.
- The IRS can come after you in order to get the money you owe them: The IRS has access to something known as a Trust Fund Recovery Penalty for any shareholder or owner. Basically, they have the power to come after the individual. That can create a whole new set of headaches.
If you get audited for payroll taxes, bring in a professional. Expert help in this matter can help you keep your business and keep you out of jail. The bottom line is, keep your payroll taxes up to date.