If you are a small business owner, the number of financial obligations that you must keep up with are staggering. One such obligation is employment taxes. Since your day-to-day focus is on the bottom line of the business, it is fairly easy to fall behind on this type of tax, if you are not paying close attention.
Many employers make significant errors when it comes to employment taxes. One common error is the failure to account for and pay the government the taxes withheld from employees' paychecks. Many owners justify this action because the business is short on income at the moment. As a result, they reason that it is acceptable to use these withholdings as a source of funding for other business operations. By doing so, they hope that their cash flow situation improves in the future, allowing them to pay back their employment tax responsibilities.
Unfortunately, the situation of the business does not always improve. When this happens, it can put the owner and officers of the business in a difficult financial situation, as there is now no money to pay the employment taxes owed.
Up until recently, many business owners have been able to get away with this. The reason for this is, in the past, the IRS would not become aware of that the deficiency existed until it received a tax return showing that taxes were owed. However, this is likely to change under a new initiative recently announced by the IRS. As taxes withheld from employees account for two-thirds of federal taxes collected, the IRS has made the regular and accurate collection of these taxes a priority.
Recently, the IRS announced a new program called the Early Interaction Initiative. The stated purpose of this initiative is to identify employers that are falling behind on their employment tax obligations earlier in the collection process and ensure that they stay in compliance and avoid needless interest and penalties.
In order to carry out this initiative, the IRS will now actively monitor employment tax deposits to pinpoint employers whose payments have declined or are received late. As a result of this initiative, if your business begins to fall behind on its employment taxes, it may start receiving phone calls and letters from the agency reminding it of its obligation to pay the taxes. In extreme cases, the IRS may send a revenue officer to your business.
Owe taxes? An attorney can help
With the new initiative in place, it is now more important than ever to stay on top of your employment taxes. Failing to do so can mean that you, as well as your officers, directors, and shareholders, could be held jointly and severally liable for the back taxes (as well as possible jail time).
If you are having employment tax problems, it is wise to involve an experienced tax attorney as early on in the process as possible. An attorney can work on your behalf to resolve the tax dispute and secure the best possible outcome for you and your company.Print this Page