What NOT to do When You’re a Small Business Owner
Who Owes Payroll Taxes
Unpaid payroll taxes are a serious matter to the IRS and are among some of the most expensive back taxes you can owe. If you’re a small business owner with a payroll tax problem, there are steps you can take to avoid the IRS crippling your business—or worse—shutting your business down completely.
Why do small business owners get into payroll tax trouble in the first place?
Some difficulties experienced by the small business owner involve the obligation of paying employees every week, in addition to meeting their obligation to pay IRS payroll taxes. As a business owner, when money is short you must pay your employees first, even if that means skipping payments to yourself. Obviously, if you do not pay your employees they’ll resign, and you will devote more time, resources and money to searching for replacements.
Putting off paying the payroll taxes until the next pay period may seem like an easy solution to improve cash flow. However, skipping payroll tax deposits is never a good idea.
All too often, skipping that first pay period quickly evolves into skipping two, then three, four or more payroll tax payments. Eventually, as the business owner tailspins deeper into payroll tax debt, the choice to completely ignore the problem seems like a preferable option to addressing a dire situation.
The IRS, on the other hand, will not be sympathetic about your financial problems. Their only concern is that you pay the payroll taxes you owe.
Penalties are the “Kiss of Death” When It Comes to Back Payroll Taxes
Penalties for failing to file and pay your payroll taxes can be the “kiss of death” for any small business owner. The IRS may tack on penalties totaling 33% in the first 16 days of delinquency. In addition, the IRS applies interest on top of penalties. It is not uncommon for a payroll tax liability to quickly double. This scenario frequently results in the permanent closing of a business.
The best advice to follow is to pay your payroll tax liabilities on time, when they are due. The experience of an IRS levy on your bank accounts, receivables and property will cost a great deal more financially, if you choose to ignore or delay this tax obligation.
Questions regarding the tax management of your business? Contact us for more information.
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