DELINQUENT PAYROLL TAXES
Harsh Penalties for Employers
Federal Tax Deposits (FTDs) for Form 941, or Employers Quarterly Federal Tax Return, are made up of withholding taxes or trust funds (income tax and Federal Insurance Contributions Act (FICA) taxes, which are Social Security and Medicare held in trust), that are actually part of an employee’s wages, along with the employer’s share of FICA. FTDs for Form 940 are taxes paid by the employer to provide for unemployment compensation to workers who have lost their jobs. Only the employer pays FUTA tax; it is not deducted from the employee’s wages.
These taxes must be paid as they become due in order to avoid penalties. If you have a deposit requirement, you must deposit electronically, which can be done via the Electronic Federal Tax Payment System (EFTPS). EFTPS deposits must be initiated by 8 p.m. Eastern the day before the due date. EFTPS is also used to pay other types of taxes, not just employment taxes.
Being a business owner is a liberating experience. But with freedom comes responsibility. It’s imperative to pay the
IRS on time. You must make business payroll taxes a priority, as this can potentially make or break your business. If you neglect to pay these taxes on time, you’ll receive a warning from the IRS. If the issue is not resolved in a timely manner, there are several possible consequences:
According to the IRS’s official website, thousands of taxpayers have outstanding Trust Fund Recovery penalties as a consequence of being delinquent on business payroll taxes. The amount owed is in the billions and growing.
Working with a Professional Employer Organization, or PEO, is a great way to relieve stress, reduce liability and avoid penalties. As the employer of record, a PEO assumes responsibility and liability for payment of wages and compliance with rules and regulations governing the reporting and payment of federal and state taxes on wages paid to employees. PEOs have long established their role as reporting income and handling withholding, FICA and FUTA.