If you’re a small business owner you may have experienced unpaid payroll tax problems at one time or another. Once you fall behind in making your payroll tax deposits it can be difficult to catch-up.
If you run your business as an S corporation, you’re probably both a shareholder and an employee. Therefore, the company should pay you a salary for the work you do for the business, which is subject to payroll taxes as well as income tax withholding.
Employers must withhold payroll taxes from employee paychecks and send the withheld money to the Internal Revenue Service. Every company of all sizes has an obligation to collect and pay payroll taxes, or 941 taxes as they are also called.
The Internal Revenue Service has rolled out a new program, the Early Interaction Initiative, designed to help identify employers who begin to fall behind in making payroll tax deposits and assist them in meeting their payment and reporting responsibilities.
The following questions and answers have been prepared by the IRS to provide employers and payroll service providers information that will help them as they prepare to implement the Additional Medicare Tax which goes into effect in 2013. The Additional Medicare Tax applies to individuals’ wages, other compensation, and self-employment income over certain thresholds; employers are responsible for withholding the tax on wages and other compensation in certain circumstances.
Although the economy has slowly improved, we still receive a steady stream of phone calls from business owners throughout Palm Beach, Broward and Miami-Dade counties needing help resolving payroll tax problems.
The IRS has established a program that allows taxpayers to voluntarily reclassify independent contractors as employees and pay significantly reduced prior employment taxes (approximately 1% of one year’s worth of compensation), with no penalties or interest. The voluntary classification settlement program (VCSP) is part of a larger IRS “fresh start” initiative to help taxpayers address their tax responsibilities. The VCSP is meant to encourage voluntary compliance with worker classification rules.
