Failure to pay employment taxes penalties

As an employer, you must pay employment taxes if you have employees. Fail to pay and the IRS will rain all over your parade. Penalties If you have employees, you absolutely must deduct and withhold various taxes from the paychecks of your employees. Since you are deducting money from the employee’s paycheck, you are handling their funds. This fact is very important to the IRS and it places great emphasis on any failure to deposit employment taxes. If you fail to pay employment taxes, you will be subject to a 100 percent penalty. Yes, 100 percent. Known as the “trust fund recovery penalty”, the penalty is assessed against the person responsible for paying the taxes, not the entity. The person can be the owner, corporate officer or other “responsible person.” In short, a business entity is not going to protect you from the wrath of the IRS. Late Payments Cash flow crunches are an inevitable event for practically every business. So, what happens if you make a late payment for employment taxes. Unless you can show a reasonable reason for the delay, the IRS is going to penalize you. Late payment penalties range in amount depending on the delay. If the delay is less than six days, the penalty is two percent. Delay for six to 15 days and you are looking at five percent. More than 15 days in delay is going to push the penalty to 15 percent. If you delay this long, the IRS will be peppering you with penalty notices telling you where you stand. In Closing Whatever you do, make sure you deposit employment taxes with the IRS in a timely fashion. Take a moment to think about the worst thing you have ever heard done by the IRS. If you fail to pay employment taxes, the actions taken by the IRS will be ten times worse and you will be the one telling horror stories.

The irs solution if you cannot pay your taxes

The Internal Revenue Service wants you to pay taxes on time. That being said, it understands this is not always possible and has created a program for such situations. The IRS Solution If You Cannot Pay Your Taxes The Internal Revenue Service is very upfront about its goal in dealing with taxpayers. While it obviously wants to collect all taxes due, it is also focused on keeping you in the system. This attitude is a relatively recent change undertaken in the 1990s. The IRS essentially determined it made better financial sense to have you in the system versus spending hundreds of man hours hunting you down. In practical terms, this means you need not have a panic attack if you do not have sufficient funds to meet your tax obligation. If you panicked this past tax deadline, there was no need. The IRS will put you on a payment plan if you cannot pay your taxes on time. The plan calls for monthly payments like a car loan, to wit, they are an equal amount each month so you know what you are obligated to pay. You are only eligible for a payment plan if you file a tax return. Once you file, you want to use form 9465 to request the payment plan. It costs $43 to file the application. The IRS will then get back to you on what it is willing to do. The payment plan process is not an audit. Millions of people apply each year and the IRS considers it standard operating procedure. No red flags are raised when you file the application. To the contrary, the IRS tends to view you as an honest tax payer since you are acknowledging the full amount due and trying to find a way to pay. Importantly, the payment plan should be viewed as a means to buy time. Making the monthly payments will eventually pay off the debt, but it will take years. Interest on the amount you owe will also continue to accrue. The best strategy for using the plan is to make the monthly payments while saving up money to make a lump sum payment to satisfy the debt. If you cannot pay the taxes you owe, do not panic. The payment plan option will keep you out of trouble with Uncle Sam.

Dear john letters from the irs

Undoubtedly, you are aware of Dear John letters. Often a young lady sent them to men in the military, often containing bad news. Well, the IRS sends them to taxpayers as well. Dear John Letters From The IRS The Internal Revenue Service sends out millions of Dear John letters to taxpayers every year. Instead of informing you of a break up, these letters let you know the IRS would like to get a bit closer. Before you bang your head on the wall, you should understand these letters are typically not the sign of impending doom. Dear John letters from the IRS are technically known as correspondence audits. Instead of showing up on your doorstep, the IRS simply sends a letter regarding some aspect of your taxes. The letter may inform you the IRS believes you owe extra money because of some issue. Surprising, the IRS may also send you a notice that it believes you overpaid some aspect of business taxes. Unfortunately, it does not do this for personal returns. The letter may also contain a request for an explanation of some aspect of your return or documentation supporting the same. Regardless, you need to understand the IRS sends so many of these out that there really is no reason to panic. Importantly, the IRS almost always asks you to take very simple steps in the letter. You are almost always asked to agree or disagree with whatever they are requesting. If you agree, you rarely have to actually do anything other than perhaps cut a check. If you disagree, you need to write a letter explaining why and then wait a few months for the IRS to get back to you. If the IRS does not agree with your explanation, a larger audit proceeding may be undertaken. Dear John letters from the IRS almost always cover simple matters. Make sure to keep copies of all correspondence, so you have a record of how things went down. The IRS often loses such things, so it can keep you out of trouble down the road if the IRS sends a second letter on the same issue.