Steps to Payroll Tax Debt Relief
If your business has paid employees, you are required to withhold payroll taxes from each person’s wages, including Medicare, Social Security, and federal income taxes.
You are also responsible for depositing the income tax withheld and filing quarterly payroll tax returns with the Internal Revenue Service.
If you are late depositing or filing your return, the IRS will impose payroll tax penalties. If you have payroll tax problems, the IRS can be very aggressive in collecting the tax debt and will most likely assign a revenue officer.
The IRS can seek collection not only from your business but also from owners and officers. The IRS can even garnish your business accounts and file tax liens against your assets.
To lift these penalties, you will need the help of a tax lawyer with years of experience at getting debt relief for employers with payroll tax problems. For a free consultation, contact Delia Law.
When Should You Deposit?
If your business reported a total of $50,000 or less in tax liability for the prior four quarters, you are required to deposit taxes each month. Depositors must deposit taxes by the 15th day of the following month.
If you reported more than $50,000 in taxes, you must deposit semiweekly (once every two weeks). In this case, your deposit schedule depends on your business’s payday. If payday falls on a Wednesday, Thursday or Friday, you must deposit taxes by the following Wednesday.
If payday is Saturday, Sunday, Monday or Tuesday, you must deposit taxes by the following Friday.
Late Deposit Penalties
If your payment is between 1-5 days late, the IRS charges a payroll tax penalty of 2 percent of the unpaid tax.
Deposits made 6-15 days late are charged a 5 percent penalty.
If your payment is more than 16 days late, the IRS will charge a 10 percent penalty.
Moreover, the IRS charges interest on any unpaid balance.
When & How Must You File?
You are required to file Form 941, which is the business quarterly tax return, by the last day of the month that follows the end of the quarter.
For instance, you must file a return for a quarter that ends in April by May 31 to avoid late payment penalties.
If you fail to file your quarterly tax return by the deadline, the IRS will charge a series of penalties.
Late Filing Penalties
For each month or partial month that you are late filing Form 941, the IRS imposes a 5 percent penalty, with a maximum payroll tax penalty of 25 percent of the unpaid tax due with the return.
The IRS also adds on a 0.5 percent tax for each month or partial month you are late in paying the tax.
How to Pay Late Payroll Taxes
To deposit payroll taxes late, use the Electronic Federal Tax Payment System, or EFTPS. If you don’t have an account, you can create one by providing your business information such as your employer identification number, or EIN. EFTPS will also need your bank account and routing numbers.
The IRS will verify your bank information and send you an enrollment letter within five business days that will contain your personal identification number, or PIN. You will make your late payment with a penalty using Form 941.
However, the IRS will dismiss late filing penalties if your tax lawyer files a successful penalty abatement.
To avoid collection action and a possible payroll tax penalty for payroll tax debt, a tax relief lawyer will assess your financial situation and come up with a plan to find the best tax solution for you. Even if you are not eligible for penalty abatement, you can settle your debt for less than the original amount with an Offer in Compromise or by negotiating a payment plan.
If you want to know how to resolve your payroll tax issues, contact Delia Law Attorneys in San Diego or Los Angeles for a free consultation. You can also call our office at 619.639.3336 (San Diego) or 310.494.0100 (Los Angeles).