Who is Liable To Pay Unpaid Payroll Taxes to the IRS?
More than 70% of the taxes collected come from payroll taxes that companies collect from employees’ salaries/wages and send to the government. Payroll taxes collections are therefore essential to the government’s ability to function. So, it should come as no surprise that the IRS and Department of Justice have prioritized payroll tax enforcement.
Payroll taxes and employment taxes are essentially the same. Compared to ordinary company taxes, the IRS tends to take them more seriously. This is so that after the employer takes the money from the employees, it needs to store it in a trust fund. While making the quarterly or daily deposit, the firm accountant should eventually include it in the records.
However, for unpaid payroll taxes on the due date, the Trust Fund Recovery Penalty is considered by the IRS. So, in this case, who is liable for unpaid payroll taxes? Employers are in charge of making sure payroll taxes are paid correctly and on schedule. Pay slips are essential evidence that this obligation was met because they list annual benefits, including deductibles like taxes.
The best approach to avoid TFRP is by not using the cash flow for any other purpose. Keep the payroll money aside for tax purposes and no matter what, employers should avoid using it.
Penalty for Unpaid Payroll Taxes
The longer the amount is past due, the more penalties there will be, increasing the financial strain. The taxes that are withheld but not returned to the IRS constitute the penalty in most cases. The original taxes liability can essentially be doubled by the TFRP. In addition to fraud charges, jail time, and a closed business, failing to pay payroll taxes can also result in them.
You can save yourself from all this hassle. Keep all your tax returns up to date and pay any outstanding payroll tax contributions. Provide attestation for financial records including bank statements, profit and loss statements, annual invoices, and accounts with escalating back reports. If you don’t adhere to all IRS dates, any payment arrangements or agreements are at risk of being canceled.