Payroll Tax PenaltiesToday, one of the worst liens that are pursued by the IRS is payroll tax penalties. This is because the IRS tends to view a failure in depositing payroll taxes as theft. Usually a percentage of payroll tax deposit is taken from the paychecks of employees. As employees end up paying tax on time, business people too are expected to collect and deposit the amount to the IRS. And it is when these business people fail to make the required payments, the IRS just bears down on the business. Falling into a payroll tax penalty is rather ugly and expensive as the tax code authorities permit the IRS to assess 100 percent penalty against the respective parties. This amount of a hundred percent penalty is calculated by assessing the amount of tax that is due to the IRS, and then doubling it. So if you fail to pay tax amounting to $20,000, you have to pay a penalty of $20,000 making the final amount you have to pay being $40,000. So looking at this 100% penalty, most business people think twice of avoiding paying their tax. It is not that the IRS only goes after businesses for payroll tax penalties. In fact, the IRS has the authority of asserting payroll tax penalty against any person working in a business that collects payroll taxes of people, has previously deposited payroll taxes on behalf of tax payers and was once accountable to account for payroll taxes. A person falling in any of these three groups too is personally pursued by the IRS for the amount that is due by them to the IRS. This stands good even if the person is not an owner or an officer of the respective business. Sometimes a new business, a business with weak cash flow and businesses that can't afford payroll penalties end up in payroll tax penalties. In such situations, it is possible to consider reducing the penalty. The first thing to be done is to approach the IRS and ask if it is possible to eliminate the penalty. This is possible if the underpayment of the payroll tax deposit is an exception and not a rule. This means that if the business has been regular in paying payroll deposits on time, and failed in only one deposit, the penalty may be wavered. Basically, you have to prove to the IRS that the payroll tax penalty occurred out of unusual circumstances. However if the penalty is not eliminated, then it will be necessary for you to seek professional tax help for tips and guidance. |