Beware of the Payroll Tax Obligations While Running Your Small Business

If you are running your own business, sometimes you may inadvertently neglect your obligation to pay payroll taxes. If you get stuck in some financial crunch and the payroll taxes are filed late, you may promptly receive notices from IRS about not submitting the 941 payroll returns.
Many a times it happens that when you are in some financial crisis, you try to manage the situation by delaying the payment of payroll taxes. This actually means you are using your employee's money to tackle your financial problems. This is not at all a solution for your problems. Anyway when your business is having problems you are increasing your own burden with IRS problems as well.

What you need to know about payroll taxes is - you delay in submitting them IRS will penalize you with additional penalties and interest on your tax bill. When your business is facing problems, this surely will increase pressure on you.

If you fail to file your payroll returns within the specified time limit IRS can charge penalties on that delay too. This can vary from 5% to 25% per month!

My advice is - Never ignore the IRS notice for the payroll taxes. If you have received it, contact a tax professional immediately before the things worsen. The IRS uses the method of 'imposed collection' for the business owners who are having payroll tax problems. IRS can also proceed to impose a levy on your vehicles, bank accounts and on anything else it can get its hands on. This may be fatal for even the existence of your business.

Trust Fund Recovery Penalty - an additional hole in your pocket!
Once the IRS holds you responsible for late submission or non-payment of payroll taxes, along with these taxes, you are made to pay some penalties and interest on them. This penalty is known as Trust Fund Recovery Penalty.
In such a critical situation you must act fast. Firstly, check if the amount demanded is correctly assessed or not. Also try to explore the possibility of any compromise or installment agreement with the IRS. If it is about to seal your assets, you should at least get one quick warning which a tax professional should be able to give.

It can happen with anyone. While facing the challenges of your business you may inadvertently forget to file your payroll taxes. On receiving a notice from IRS, you realize the mistake. Then you may not be able to avoid penalties and interest. IRS has wide powers and it can impose a levy on anything possible including your car and your bank balance! People try to postpone the payroll work and then make big mistakes while facing the hardships. Please don't wait until you receive such notice. Act quickly. Chintamani Abhyankar explains how.

Chintamani Abhyankar, is a well known expert in the field of finance and taxation for last 25 years. He has written many books explaining inside secrets of the magic world of personal finance. His famous eBook Stop donating your money to IRS which is now running in its second edition, provides intricate knowledge and valuable tips on personal finance and income tax.