So by today, you, or your bookkeeper or accountant, should be done with your corporate tax return. As a business owner you would never forget to file your taxes or ask for an extension by March 15th. So why is it that so many business owners forget or fail to pay employment taxes? Just this month, a Washington state jury convicted a woman for failing to pay more than $2.6 million dollars in federal payroll taxes. The Justice Department’s Tax Division said the woman failed to deposit payroll taxes she withheld from her employees. “Employers who willfully fail to timely collect, account for and deposit employment taxes are, quite simply, stealing from their employees and the U.S. Treasury,” said Principal Deputy Assistant Attorney General Ciraolo of the Justice Department’s Tax Division. The court says the verdict is a reminder to all employers that payroll taxes are not optional. So this week we’re reviewing what payroll taxes employers are responsible for and how and when to report them:
- WHAT ARE PAYROLL TAXES – Payroll taxes are federal income taxes your company must withhold from your employees’ paycheck. The IRS says in general you must deposit federal income tax withheld, and both the employer and employee Social Security and Medicare taxes.
- REPORTING PAYROLL TAXES – The IRS requires that all payroll tax deposits must be made electronically using the Employer Federal Tax Payment System or EFTPS. To register your company go to eftps.gov. Then you can begin to deduct payroll taxes from your business bank account. If you don’t want to handle this yourself, hire a bookkeeper or consider hiring a payroll company to take care of this for you.
- DUE DATES – The IRS requires payroll deposits to be made monthly or semi-weekly. Before the beginning of each calendar year, you or your bookkeeper or payroll company must determine which of the two deposit schedules you intend to use.
- PENALTIES FOR PAYROLL REPORTING – In the Washington state case, the employer withheld payroll taxes for two years, but didn’t pay those taxes to the IRS. Instead, authorities say she bought several automobiles and shared the money with her family members. Failing to make a timely deposit could result in a penalty of up to 15 percent or worse. If you find yourself in this kind of mess, contact a reputable Tax Attorney. I refer everyone to Steve Klitzner of Florida Tax Solvers. You can reach him at firstname.lastname@example.org or e-mail me and I can introduce you.
Failing to deposit payroll taxes could result in placing that Washington state woman in prison for five years. Plus, she could face a $250,000 fine for each count of failing to pay employment taxes. She will be sentenced in June. The IRS is coming down hard on those who skip out on payroll taxes. They even have a criminal investigation team of agents looking into companies that aren’t in compliance. Don’t let your company fall into this situation. Make sure to withhold the right amount and deposit payroll taxes in a timely manner. If you have any questions, don’t hesitate to contact me or someone on the Brigade Bookkeeping team. Trust us, we won’t let you fall out of compliance!