Employment taxes cause far too many headaches. Unfortunately, the consequences of filing or depositing incorrectly are far worse than the filing process itself. Expect the following outcomes if your business makes payroll tax mistakes.
Never-Ending Struggles With Tax Debt
If you file late or incorrectly, you may face steep penalties. Interest typically accrues on these fees. The longer you take to pay up, the deeper a hole you’ll dig for your business.
Federal Tax Lien
If you fail to pay tax debt, the federal government may place a legal claim against real estate or other personal property. In addition to limiting access to your assets, a lien may destroy your ability to obtain credit. Banks may close existing business loans in response to damaged credit. Furthermore, the lien will attach to business property such as accounts receivable. It may continue even if you file for bankruptcy. Notice of Federal Tax Lien can damage your company’s reputation and make it more difficult to attract vendors or clients.
Piercing the Veil
IRS tax issues don’t end with business closure. While some liabilities can be avoided by using your company as a shield, payroll taxes are a clear exception. In pursuing unpaid employment taxes, IRS officials are allowed to ‘pierce the veil’ and go after responsible individuals. Sec. 6672(a) places liability on “any person required to collect, truthfully account for, and pay over any tax imposed.”
Severe cases involving intentional non-payment may result in criminal proceedings. In addition to issuing financial repercussions, the IRS could refer your case to criminal divisions. Yes, the IRS typically reserves jail time for severe cases involving several million dollars in unpaid taxes — but this is a perfect time for the motto ‘better safe than sorry.’ A noteworthy example: the Vice President of a South Carolina bank faced a potential five years in prison after pleading guilty to employment tax fraud.
Made a mistake on your business payroll taxes? Get in touch with the team at Highland Tax Group at 720-398-6088 for the insight you need to feel back in control of your future.