The IRS can sometimes be surprisingly forgiving of those who fail to file or pay taxes on time, particularly if they actively make arrangements for extensions or installment plans. This mercy does not always extend to those who struggle with unpaid or incorrect payroll taxes. The following are among the harshest repercussions you’ll face if you mess up with your IRS 941 taxes:
If you fail to pay your 941 taxes, you may be assessed the Trust Fund Recovery Penalty TFRP — particularly if you are believed to have willfully failed to collect payroll taxes or otherwise evaded the IRS. The TFRP is a notoriously harsh penalty — it totals 100 percent of the unpaid taxes, as well as any interest that accrues on that balance.
IRS Collection Action — And Accompanying Consequences
Sometimes, the TFRP itself isn’t the biggest problem associated with 941 non-payment, although, of course, the penalty can be severe. In many cases, however, business owners or other responsible parties suffer more due to the actions the IRS takes in pursuit of unpaid taxes and TFRP fees. Bert Martinez, for example, told CBS News that he found himself facing an overdrawn checking account at the worst possible time — during his daughter’s health crisis. He had previously failed to handle payroll taxes, so the IRS collected on his account. This impacted not only his family but every aspect of his business. Checks he’d already written to suppliers began to bounce. He was fortunate enough to avoid significant overdraft fees, but most entrepreneurs would not be so lucky.
We also had an egregious case that was actually referred to the IRS Criminal Division, prior to this the IRS filed suit to seize his personal residence to collect the taxes owed. This particular client failed to meet deadlines, continued to miss Federal Tax Deposit due dates, and had failed to respond to repeated requests for information.
When it comes to Form 941, the stakes are clearly high. There is no room for error, so it is important to work with a tax expert you trust. The Highland Tax Group can help you every step of the way; call 720-398-6088 to learn more.