Owing payroll taxes is a BIG deal to the IRS

Education & Training with Hallmark Accounting & Tax Solutions, LLC

Elizabethtown, KY Owing payroll taxes is a BIG deal to the IRS because they call the money withheld from employees taxes "trust funds"  Your employees are "trusting" you to take the money you witheld from their paychecks and turn it over to the IRS and State governments accordingly. In addition to the employees portion of the taxes, the company is responsible for their portion of taxes which include:

  • matching Social Security taxes (6.2%)
  • matching Medicare Taxes (1.45%)
  • Federal Unemployment taxes (6% of the 1st $7,000 paid in wages to each employee)

As you can see, payroll taxes can add up as there also may be State Unemployment taxes due as well.

Inability (or unwillingness) to pay payroll taxes is the #1 reason why small businesses in the U.S. close. 

Federal Payroll taxes are required to be paid through the EFTPS online system. There are intense penalties imposed on those who don't pay/deposit the payroll taxes on time, such as Failure to File Penalties which have the following rates:

  • 2% if paid within 5 days of the original due date
  • 5% if paid for 5-15 days of the original due date
  • 10% if paid more than 10 days after the original due date
  • 15% if the deposit is not made within 10 days after the 1st Delinquency Notice

In addition, if you do not file the Form 941 Employer's Quarterly Federal Tax Return, you are charged 5% per month for Failing to File (FTF) up to a 25% maximum penalty. So, as you can see, after all is said and done, the total amount of penalties and interest alone (we haven't even mentioned interest!) could very well total up to 40-60% of the original taxes owed. That's intense!

So what's the point of this post? Pay your taxes. If you don't think you can afford to pay the required payroll taxes, then don't hire employees. It's that simple. That may sound blunt, but payroll taxes are a BIG deal with the IRS and they aggressively go after those who don't pay them. I don't want to see you get into that kind of trouble. If you do, reach out to someone trained to help resolve the issue. Remember, there's ALWAYS hope!

Michelle R Brown, EA

Hallmark Accounting & Tax Solutions, LLC

P.O. Box 209

Rineyville, KY  40162

PH. 270-506-3935 or 270-634-HELP






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Michelle Brown

Enrolled Agent / Tax Resolution Professional
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