When you first opened your business, the issue of payroll taxes was probably not the foremost concern on your mind. As business grew and you hired employees, however, your obligations to the IRS increased (whether you knew it or not). Payroll taxes are taxes that are imposed on employers. The tax is calculated as a percentage of the salaries that employers pay their employees. Employers are required to withhold tax from employees’ wages for income tax, social security contributions, and unemployment and disability insurances. Employers are also required to pay tax from their own funds relating to the employer’s funding of the social security system and other insurance programs. If you fail to meet these obligations, the IRS is likely to come calling.
7 Ways Business Owners Find Themselves With Payroll Tax Problems
Unfortunately, payroll tax problems can arise more easily than one might think. The following are seven examples of how these problems sometimes come to be:
- The business is short on available cash to pay its suppliers, so it borrows from payroll tax money.
- The business is short on available cash to pay its rent, so it borrows from payroll tax money.
- The business owner thinks that it can catch up on missed payroll tax payments by the time the IRS calls or visits regarding the missing payments.
- Incompetent or dishonest employees fail to pay payroll tax debts and hide their mistakes from the business owner.
- Interest and penalties on unpaid payroll taxes continue to accrue, causing the tax problem to grow. Penalties arise as a result of a failure to file, failure to deposit, or failure to pay.
- The business owner does not practice good record-keeping habits. Historically, small business owners are the largest source of uncollected taxes. If the IRS conducts an audit, poor record keeping can create problems.
- Improperly classifying employees.
If you find yourself facing a payroll tax problem, we encourage you to act quickly. Ignoring the problem will not make it go away; instead, it will make the problem worse. We encourage you to contact us today for more information at (800) 721-7054.