The Internal Revenue Service is cracking down on business owners with past due payroll taxes. The effort is directed at small business owners as they know that these business are prone to commit such omissions. Your business, and maybe your freedom, can be taken away from you if you do not correct the situation. It is therefore incumbent upon small business owners to be familiar with the common problems in payroll tax issues in order to avoid big tax debt, penalties or federal criminal indictment.
1. Increased Tax Compliance Enforcement
The IRS is aware that small business owners are often times remiss in remitting their payroll tax collection and as such, their efforts at tax collections are focused on these business owners. In times of economic downturns when the government needs money the most, IRS enforcement efforts are directed at big time tax evaders who happen to be the small business owners.
2. Losing one’s business
The IRS has tremendous power when it comes to collecting unremitted payroll taxes. They can lock up your offices, put you out of business, without the need of obtaining court orders. Your machinery and equipment can be seized. The IRS can contact your clients who owe you money and ask them to pay what they owe you to them - virtually intercepting payments that are due you. It will be for the benefit of your own business that you settle with the IRS before they take steps that can effectively close your business.
3. Penalties add up
Aside from the payroll taxes that you failed to remit, penalty assessments can drastically increase your total bill. Penalties can be assessed for your failure to file payroll taxes, failure to deposit the same, and failure to pay. Such aggregate penalties can add up to round 33 percent plus additional interest if you fail to pay within 16 days past the due date.
4. Federal Crime
Failure to file or pay payroll taxes can be referred by the IRS to their Criminal Investigation Division and later on to the Department of Justice, making your failure to file or pay a federal crime.
5. Borrowing from payroll taxes
Many small business owners borrow from payroll taxes they collect and use the same for their operating expenses when confronted with cash flow problems. Business owners must always bear in mind that what they collected from their employees do not belong to them; they are government money and should be remitted right away.
6. IRS can go after individual owners of businesses
The Trust Fund Recovery Penalty (TFRP) can be utilized by the IRS against owners and shareholders in cases of non-remittance of payroll taxes. The IRS can go through the corporate veil in order to run after individuals who own a business.
7. What to do in an audit?
If you are in a situation where your business owes payroll taxes, the best and most intelligent course of action is to get professional help. Get a lawyer and a Certified Tax Resolution Specialist who can represent you in the event of an IRS audit. They are well prepared to represent you and your business interest before the IRS auditors.
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