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. Failure to file payroll tax returns by the deadline can result in a penalty of five percent per month of the net tax amount due, reduced by the amount of the failure to pay penalty for the same month. The maximum combined penalty can reach 47.50%.
Many other penalties may also apply for failures in connection with unpaid payroll taxes, including penalties for failing to deposit payroll taxes, failing to make deposits using EFTPS when required, and trust fund recovery penalties. The specific penalties due will depend on many factors, but can often total thousands of dollars in additional money owed to the IRS. Interest will also accrue on the unpaid taxes and penalties.
Boca Raton tax resolution services are available to those who have been unable to comply with all payroll tax obligations. There are several options for resolving back tax debt, so it is best to consult with a professional with experience in settling unpaid payroll taxes. With the right help, it may be possible to significantly reduce the amount of penalties that must be paid and ensure payments are manageable without interrupting ongoing business operations.
Options for Addressing Unpaid Payroll Taxes
There are three different types of taxes that fall under the broad category of payroll taxes: income tax withheld from wages and salaries paid; Federal Unemployment tax, which funds unemployment benefits; and the Federal Insurance Contribution Act (FICA) tax which funds Medicare and Social Security. Employers must withhold an appropriate amount of income tax from employees and must also pay for a portion of an employee’s FICA taxes.
The IRS can put a lien on property and take other enforcement steps to try to collect unpaid back payroll taxes, such as levying your bank account or accounts receivable. As a result, it is important to be proactive in resolving your tax problems.
The first step to resolving problems with back payroll taxes is to begin making deposits going forward. The IRS may only negotiate with you on resolving your back tax problems if you have come into compliance with federal tax laws. This means you should start depositing the payroll taxes and filing Form 941, Employer’s Quarterly Tax return on a timely basis.
Once you are current, you can explore options including an installment agreement to pay back taxes over time and request penalty relief. In certain circumstances, making an Offer in Compromise is another possible option which involves settling the unpaid payroll taxes for less than the full amount due. However, you must agree to be personally liable for the trust fund portion of the payroll taxes.
East Coast Tax Consulting can provide assistance with developing the correct course of action needed to get you back on track with your payroll tax obligations. Call us today to speak with our trusted and experienced tax debt relief professionals and put an end to your unpaid payroll taxes.