As a small business owner, paying your employees’ payroll taxes is crucial to running your business. Unfortunately, sometimes money is tight and small business owners find themselves in payroll tax debt. Owing payroll taxes to the IRS is a serious matter that can result in significant penalties and even the closure of your business. This article will discuss the steps to avoid payroll tax debt and what to do if you are already in trouble.
Why Small Business Owners Get Into Payroll Tax Trouble in the First Place
Paying your employees’ payroll taxes is mandatory, and it should always be a top priority. Unfortunately, small business owners often struggle with cash flow, and they may prioritize paying their employees and vendors over payroll taxes.
This can be a disastrous mistake as the problem can snowball out of control. When you miss one payroll tax deposit, it can be easy to tell yourself that you will make it up next time. However, if you don’t make up for the missed deposit, the debt will only continue to grow, and before you know it, you could owe tens of thousands of dollars or more in back taxes.
Another reason small business owners may get into payroll tax trouble is incorrect record-keeping. It’s important to keep accurate records of payroll taxes and ensure that your calculations are correct. Failure to do so can result in penalties from the IRS.
The Consequences of Failing to Pay Payroll Taxes
The IRS doesn’t take missing payroll tax deposits lightly. They don’t care about your financial problems; all they care about is that you pay what you owe them. Penalties for failing to file and pay payroll taxes are severe. In fact, they will start adding penalties totaling 33% within the first 16 days. On top of that, the IRS will add interest to your balance, which, as a result, can double your debt in a short period.
If you don’t take immediate action, the IRS may shut your business down. This is because the agency considers the non-payment of payroll taxes as stealing from the government. The IRS has the power to seize your business assets, your receivables, and even your personal assets to satisfy your payroll tax debt.
Should You Call The IRS To Get Your Payroll Issue Fixed?
Small business owners who owe payroll tax debt might think of calling the IRS to resolve the issue. However, we do not recommend this. When you call the IRS, you will most likely be talking to a poorly trained representative who will not have any sympathy for your situation. The representative will ask you a series of questions about your personal and financial information, which will be used to levy your bank accounts, seize your property, and take your receivables.
What to Do If You Owe Payroll Taxes
If you find yourself in payroll tax debt, it’s important to act quickly to resolve the issue. Here are the steps you should take:
Step 1: Don’t Ignore the Problem
Ignoring your payroll tax problem will not make it go away. If you’re unable to pay your payroll taxes, reached out to the IRS immediately and ask for more time to pay. You can also work with an experienced tax professional who can help you negotiate a payment plan with the IRS.
Step 2: File Your Payroll Tax Returns
If you haven’t already, file all of your payroll tax returns. Even if you can’t afford to pay the taxes owed, you must file the returns. The penalties for failing to file are much higher than the penalties for failing to pay.
Step 3: Stay Current on Your Payroll Taxes
Once you’re caught up on your payroll tax returns, make sure you stay current on your payroll taxes going forward. This means making timely payroll tax deposits and filing accurate payroll tax returns.
Step 4: Get Help from an Experienced Professional
If you owe payroll taxes, it’s essential to get help from an experienced professional who deals with the IRS on a regular basis. You need someone who can represent you and protect your business. While it may be tempting to represent yourself, you wouldn’t represent yourself in court without a lawyer for a serious crime. The same applies to the IRS. Hiring an expert who understands the tax laws and the IRS collection process can make all the difference in resolving your payroll tax debt.
Contact Us for Help
If you’re a small business owner struggling with payroll tax debt, contact our firm for a free, no-obligation consultation. We have extensive experience helping small business owners keep their businesses and resolve their IRS payroll tax problems. Don’t wait until it’s too late. Let us help you today.