Failure To Withhold Employment Taxes - Don't Anger The IRS

When you are told that employment taxes are an important part of a business, you should believe it. The failure to handle withholding from your payroll properly and to prepare and file reports timely will lead to a severe penalty from the IRS.

The obligation to make sure that the withholding of taxes from the employees on your payroll is done properly is a serious one for any employer. It does not matter if you have only one or two employees. The failure to obey the laws on employment taxes can lead to a serious IRS penalty. Many a new small business owner has been overwhelmed by the seemingly endless packets of forms and booklets that arrive from the IRS and the State when you begin your business.

It may appear that learning about and performing brain surgery would be easier than understanding your responsibilities in regard to tax withholding and reporting. This will not get you any sympathy from the IRS should you fail to do it properly and in a timely manner. The timely manner part is, perhaps, the more important of the two. Errors can be corrected, but you get fined for being late.

It is hard to pass off the blame, too. A recent court decision illustrates this point. A small automobile dealership hired a bookkeeper to handle the payroll responsibilities for the firm. His job duties included the filing of quarterly reports to the IRS and the depositing of funds withheld. He performed these duties adequately for a time, and then for some unexplained reason ceased to do it. The IRS imposed so severe fines on the firm for failure to file timely reports.

The firm sought abatement against the fines based on the fact that the failure to comply was the fault of the employee and the employee alone. They had trusted him and he had let them down. Of course, when his failure was discovered, he was promptly fired. The firm did not think they should be held responsible for his failure. Of course, this defense failed. It is the business that has the responsibility to withhold and to file properly. How, they discharge this responsibility is their concern, but whatever way they do it, if they fail it comes back to them.

Any business, large or small, should be aware of the seriousness of the IRS when it comes to the filing of employment tax forms and the proper handling of funds connected with withholding. There are stiff penalties for non-compliance. If it is a small business, and they are not familiar with what needs to be done, they must seek professional assistance.

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