Failure to Pay Employment Taxes Can Result in Stiff Penalties.
Our tax attorneys are here to help get you out of the bind.
Avoid the Pitfalls of Unpaid Employment Taxes
Employment taxes are different from other taxes in that they are held by an employer in trust for employees. As the employer, it is your responsibility to withhold employment taxes in good time to the IRS.
If you fail to collect, report and remit payroll taxes, the IRS has the clearance to assess penalties and interest on your account. Ultimately, you are held personally responsible for failure to withhold or pay payroll taxes.
If you’ve fallen behind on payroll taxes, the tax attorneys at Wiggam Law can guide you through the process and help you with the appropriate paperwork that you need to file in order to avoid penalties.
What Payroll Taxes Are You Required to Pay?
As an employer, there are payroll taxes that you are required to pay, including:
- Social Security
- Federal and State Unemployment
Social Security and Medicare taxes are split equally between employers and employees, while the Federal Unemployment Tax Act (FUTA) is paid solely by the employer.
FICA Tax and Form 941
Federal Insurance Contribution Act (FICA) taxes fund the federal Social Security and Medicare programs. FICA subtracts 15.3% of an individual’s wages, half of which is paid by the employee and the other half by the employer.
As an employer, you are required to file Form 941 on a quarterly basis to report income tax withholding, Social Security and Medicare taxes. It is used to report withholding and the shared taxes that are split 50/50 between employee and employer.
Federal and State Income Tax
Employers are required to withhold Federal and State (in most circumstances) income tax from their employees’ wages. Paid for only by the employee, income taxes are due monthly or semi-weekly. Federal income taxes are reported quarterly using Form 941. State and local income taxes vary by location.
Federal Unemployment Taxes and Form 940
Paid entirely by the employer, Federal Unemployment Tax Act (FUTA) is reported annually using Form 940. If a business has one or more employees or pays $1,500 or more to employees in a quarter, it is required to pay Federal Unemployment taxes. Most employers pay both federal and state unemployment taxes.
State Unemployment Taxes
Employers typically pay state unemployment tax in every state where they have employees. In most cases, payments are due quarterly, but the rates and wage bases vary by location.
In Georgia, employers pay a specified rate on a quarterly basis. You are only required to pay taxes on the first $9,500 of earnings for each employee.
Employee Wage and Tax Reporting
Employees are required to accurately complete wage and tax reporting forms. If you fail to complete the proper forms or miss the required deadlines, monetary penalties are filed.
Businesses are required to send Form W-2, Wage and Tax Statement to all employees. Independent contractors must receive Form 1099 by January 31 of the following year.
What Happens When You Can’t Pay Payroll Taxes?
When a business cannot pay payroll taxes, the IRS sends notice and applies monetary penalties to the account. If the taxes still cannot be paid, the IRS can place a lien on the employer’s assets or file criminal charges.
Who Is Responsible for Unpaid Payroll Taxes?
An employer is responsible to willfully withhold and pay payroll taxes. The IRS states that “any person required to collect, truthfully account for, and pay over any tax imposed by” the Internal Revenue Code who willfully fails to do so, will, “in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax … not collected … and paid over.”
However, if a corporation fails to do so, the responsibility to pay the taxes can be pinned on any responsible individual within a company, making that person personally liable for their employer’s unpaid taxes. This IRS assesses the Trust Fund Recovery Penalty against those individuals in these situations.
Will the IRS Negotiate Payroll Taxes?
While payroll back taxes is one of the most serious issues you can have with the IRS, there are still options to negotiate payroll tax resolution. They offer tax resolution to all types of taxpayers, but it will be more difficult.
As with all tax debt circumstances, the IRS starts the collection process by sending a letter to assess your penalties and demand immediate payment. If you fail to respond or refuse to take action, you could face consequences, such as tax liens, wage garnishments, bank levies, property seizure, and jail time.
Employers do have options to negotiate payroll tax resolution with the IRS, including:
- Request an Installment Agreement
- Request an Abatement or Extension
- Consider Tax Deferment Options
The tax lawyers at Wiggam Law are experienced at guiding employers through the best strategy for your unique situation.
Penalties for Unpaid Employment Taxes
Sometimes considered tax evasion, unpaid payroll taxes is one of the most serious matters to have with the IRS. Businesses that violate employment tax laws may be subject to:
- Monetary Penalties
- Interest on Back Taxes
- Liens Against Property
- Civil and Criminal Sanctions
- Jail Sentences
Since the IRS makes the process more difficult for employers with unpaid payroll taxes, it is best to have professional representation to counsel and negotiate on your behalf. The tax lawyers at Wiggam Law understand how to communicate with the IRS, making the process less complicated, while at the same time saving the employer money.
Failure to Deposit Penalty
It’s common for an employer to withhold the correct amounts in payroll taxes, and then for whatever reason, fail to send payment to the IRS. Failure to deposit penalties are determined by the number of days past the due date. The penalties increase with the number of days. Here are the penalties per number of days:
- One to Five Days Late Results in a 2% Penalty
- Six to 15 Days Late results in a 5% Penalty
- 16 Days Late or Within 10 Days of the First IRS Notice Results in a 10% Penalty
- 10 Days After the First IRS Notice Results in a Maximum Penalty of 15%
If you have Failure to Deposit penalties, Wiggam Law tax attorneys can help decrease the penalties for your situation.
Jail Time for Unpaid Employment Taxes
Typically, the IRS does not file criminal charges for unpaid payroll taxes, unless the employer owes millions of dollars. However, if convicted, the sentence can often be five years in prison.
Wiggam Law employment tax attorneys are able to represent you no matter how much you owe in unpaid payroll taxes.
Payroll Tax Debt Relief
Our experienced employment tax attorneys can help you resolve your payroll tax issues. We’ve helped a number of our clients save thousands of dollars. With our years of knowledge and experience, as well as endless payroll tax debt relief success stories, we can save you money, too.
Payroll Tax Debt Relief Success Stories
Our clients, a mother and daughter, were both being assessed a Trust Fund Recovery Penalty of $505,634 as the IRS claimed they were a responsible party for unpaid payroll taxes for a hospital that previously employed them as CEO and CFO, respectively. We successfully argued that the clients should not be personally liable for the non-payment of trust fund liabilities for the hospital. The IRS agreed with our position and determined that our clients should not be held personally liable, saving them both the full amount of $505,634.
We disputed an IRS assessment against our client, a church, resulting in a reduction of the liability from $474,909 to $38,266. The IRS also removed some late payroll tax filing penalties, saving our client an additional $9,000.
Our client, a manufacturing company, owed $123,371 in federal payroll taxes. A Federal Tax Lien would have closed down the company’s line of credit, severely damaging the business. We worked with the IRS, resulting in an abatement of $29,550 in penalties.
Our client was suffering after their former employee embezzled the company’s payroll funds. Between the IRS and Georgia, our client owed a substantial amount. Our Penalty Abatement Requests saved our client $359,078 across their combined federal and state liabilities.
Contact Our Employment Tax Attorneys in Atlanta, GA
For all employment tax situations, Wiggam Law tax attorneys can help guide you through the process and negotiate to save you time, stress, and money.