Failure to pay employment taxes could lead to hefty fines, liens, business closure, or even jail time. The IRS will stop at little to collect owed taxes. But why is the IRS so harsh?
Read on to find out:
A Common Misconception: The IRS Aims to Profit Off Penalties
Slapped with hefty fines and interest, it’s easy to assume that the IRS intends to profit off your late payment. In reality, the IRS seeks to deter employers from failing to file. It takes considerable effort for the IRS to collect fines; the goal is always to encourage employers to file correctly in the first place.
Employer-Based Payroll Versus Employee Payroll Collection
Employers and employees are both responsible for a portion of payroll taxes. While employees can face harsh consequences for their failure to cover payroll taxes, repercussions tend to be far steeper for employers for several reasons:
- Most businesses withhold payroll taxes on employees’ behalf. The IRS may regard failure to pass on said payments as outright fraud, and not an inadvertent accounting error.
- Unpaid payroll taxes on a company-wide level can account for millions of dollars missed by the IRS. The IRS stands to gain more from nabbing responsible employers than individual employees who owe minimal back taxes.
- Employers who successfully avoid passing on payroll taxes one year will likely continue to evade the IRS in the future. Immediate aggressive action can prevent bigger problems down the road.
The IRS Isn’t Always As Aggressive As You Think
To the average individual, IRS seems far too aggressive in its efforts to obtain back taxes. In reality, the Treasury Inspector General for Tax Administration (often referred to as the watchdog for the IRS) reports that, in 57 percent of cases, the IRS fails to take appropriate steps before referring to tax debt as ‘uncollectible.’
Frequent IRS failures shouldn’t be viewed as reason to slack off on filing; if anything, TIGTA’s push for more aggressive action means that employers who previously avoided IRS interference may be in for future trouble.
Do you owe back taxes to the IRS? Take a breath. Call the Highland Tax Group right now 720-398-6088; we’ll give you the clarity you need.