The IRS can be tough when it comes to collecting payroll taxes. Businesses are required to withhold taxes from employee wages and pay these funds to the IRS. However, if the IRS doesn’t get this money, the penalties can mount up quickly. It doesn’t matter what your reason could be for not paying this money – even if it’s a good one. Not only will the IRS target the business owner, but they’ll also go after the check signer and any other person responsible for failing to pay the taxes. If you’re convicted, you could go to prison for up to five years.
Case in point: Recently, a former bank vice president of a South Carolina-based bank, Douglass Corriher, pleaded guilty to conspiring to defraud the United States. Using multiple nominees, Corriher circumvented federal regulations that limit how much money can be loaned to a single entity. He extended loans to a bank customer that operated several North Carolina staffing companies.
The staffing company told its clients that it would pay the payroll taxes for thousands of temporary workers it supplied to them. The company even issued W-2 forms for each employee and filed employment tax returns showing it had withheld the funds from the employees’ wages. However, the payroll taxes were never sent to the IRS.
Corriher was aware that the company owed over $1 million in payroll taxes, but continued to make loan advances to them. Primarily, because Corriher knew that the unpaid payroll taxes collected would help the staffing company repay the bank’s loan. Therefore, the bank could continue to collect high interest rate fees on the loan advances in addition to other fees. Because of his actions, Corriher faces a maximum sentence of five years in prison as well as other penalties.
Payroll Tax Remittance Failure – No Laughing Matter
While not all payroll tax cases are criminal ones, a civil case is nothing to mess with either. The IRS can come down hard on a business – even closing it, especially if there is a pattern of payroll tax failures.
Failing to pay your payroll taxes – even a late payment – is a serious matter. It doesn’t matter if you needed the money to pay suppliers to keep the business open. The IRS doesn’t view that as a good reason not to pay them. Additionally, the IRS will personally pursue anyone who owns the business or has check-signing authority for the company and its payables, even if you had no knowledge that the IRS wasn’t paid. If the company fails to pay, the IRS will assess a Trust Fund Recovery Assessment, also known as a 100% penalty, against each responsible person. The penalty equals the amount of the unpaid taxes. By pursuing all responsible individuals, the IRS hopes someone will eventually pay the money owed.
At The Payroll Department, we know honest small business owners aren’t out to defraud the IRS. And, we know you would never to do anything purposefully to have to spend your hard-earned revenues on IRS penalties, fees or fines. But, the fact is, not every business owner is knowledgeable in all the local, state and federal payroll and tax laws. If you make even a small, simple error, the penalties can really cause a hit to your company’s bank account.
That’s why several Indiana businesses rely on The Payroll Department to manage their companies’ payroll processing and payroll tax remittance. They want to have professional payroll experts to ensure everything is accurately reported and that their payroll taxes on deposited on time.
Therefore, if you want to have peace of mind and know that your payroll and payroll taxes are being handled with the utmost care, contact Teresa Ray at The Payroll Department. We’re so confident that we’ll exceed your expectations that we guarantee your satisfaction. So, what do you have to lose?
– Ariane of The Payroll Department Blog Team