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Because payroll taxes are a vital source of funding for government programs, federal law requires business owners to withhold and submit payroll taxes to the IRS. Businesses that fail to meet these requirements may be subject to severe penalties. Understanding payroll tax requirements and the potential penalties surrounding this mandate are a must for any business owner.

If you own a business with employees, you have the responsibility to manage and file payroll taxes. This responsibility extends to:

  • Federal, state, and local income taxes
  • Social Security
  • Medicare taxes (also called the FICA tax)
  • Federal and state unemployment taxes‌

Create a process for setting aside employee taxes for the IRS. Your depositing schedule may be:

  • Semiweekly
  • Monthly
  • Annually 

‌Deposit payroll taxes according to your depositing schedule. Please refer to IRS Publication 15, Circular E – an employer’s tax guide for payroll tax guidance. 

If you’re responsible for state taxes, contact your state to find out what your requirements are. 

Not Paying Payroll Taxes

As far as the IRS is concerned, there is no excuse for not paying payroll taxes. As a business owner, not meeting this responsibility is one of the worst things you could do. Not only is it stealing from the government, but also from your employees.

If you do not pay your payroll taxes on time, the IRS can charge additional penalties and interest. In addition, if you purposefully avoid paying payroll taxes, it could lead to criminal charges punishable by up to a $10,000 fine or five years in prison.

Other actions that the IRS can take are levies and liens.  A levy is when the IRS seizes property to satisfy a tax debt. This can include taking money from a bank account, garnishing wages, and seizing vehicles or other personal property.

A federal tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government’s interest in all your property, including real estate, personal property, and financial assets. A federal tax lien takes priority over all other liens. If you receive funding through a financial institution, a tax lien may restrict your ability to continue funding, as the IRS may now have claim to the assets that your lender holds as collateral.

Take Advantage of Experts

If managing payroll funding isn’t what you’re good at, enlist an expert in the field. There are a number of providers on the local and national level that specialize in providing payroll services, with many of them having online portals that enable the payroll process and tax calculation to be made easy. As part of the process, they collect the taxes due and help to calculate, collect, and pay by your due dates. Your provider then remits payments to the appropriate local, state, and federal agencies on your behalf. 

If you are confident in your ability to manage taxes, seek help in other ways to alleviate your burden as a business owner. For example, get help with invoice factoring to better manage cash flow within your business. 

Payment Plans

The IRS understands that occasionally things happen that impact your ability to pay on time. A payment plan extends your payment deadline to give you more time. Learn more about the IRS collection process here.

If you need assistance obtaining an installment agreement, you can use a CPA, a tax attorney, or a specialized resolution company, such as Tax Guard. Once you have an installment agreement in place, they can also help you obtain a subordination agreement if needed, allowing you to continue to receive funding from your finance company.

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