If You Owe Payroll Taxes

"Payroll taxes form a key part of our tax system. When individuals and businesses evade their employment tax obligations, it not only undermines our tax system, it also creates an unfair situation for people who are following the law. The IRS is committed to compliance in the payroll tax arena, which helps ensure fairness and faith in our tax system."               

- IRS Commissioner Chuck Rettig

Payroll taxes (also called employment taxes) include the income tax, Medicare and Social Security that a business withholds from its employees’ pay checks, and also include an amount that the business matches for Medicare and Social Security.  The portion of the tax that is withheld from the employee is called “trust fund” tax.  Payroll taxes withheld by employers account for nearly 72 percent of all revenue collected by the IRS, making noncompliance and cheating in this area one of the biggest problems for the nation’s tax system.

Payroll tax collection and compliance are the highest priority of the IRS, and special care must be taken when dealing with the IRS in a payroll tax matter.  There are many reasons for this, including the following:

• Willful failure to pay employment taxes is a crime.  IRC 7202 imposes a prison sentence of up to 5 years and a fine of $10,000 for any person who “willfully fails to collect or truthfully account for and pay over” employment taxes.

• Individuals in a business who fail to pay employment taxes can be held personally liable for a penalty equal to the full amount of the unpaid trust fund tax.  There is no corporate veil or other liability shield that will protect an individual from this penalty. 

The IRS does not treat payroll tax cases the same as it does other cases.  The IRS is far more likely to take enforcement action to collect unpaid employment taxes, and the arsenal of weapons at its disposal to enforce compliance of employment tax laws is extensive.  The IRS is more concerned with employment tax compliance than with the survival of your business. 

Don’t take them on by yourself.  There are ways to ensure that you are treated fairly and that you are given a chance to save your business.  Call Straightline Tax at once to help you with your payroll tax problem.