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What to do if you can’t pay your payroll taxes

On Behalf of | Dec 8, 2022 | Tax |

Employers in Texas are responsible for calculating their own share of taxes, deducting the correct amount of taxes from their employees’ wages, depositing the payments and filing returns with the federal, state and local government entities. When some of the taxes go unpaid, the IRS may come after the business.

The responsible individual or group

When a business fails to remit payroll taxes, the IRS will hold the responsible individual or group liable for payment. According to tax law, the person responsible is someone with the authority to sign checks, approve payments or otherwise handle financial transactions for the company. This might be a business owner, corporate officer, shareholder or even an employee working in payroll administration.

Repercussions of not paying payroll taxes

Individuals who fail to remit payroll taxes and don’t comply with IRS orders to do so can face criminal prosecution as well as a variety of civil sanctions. These range from financial penalties to interest on unpaid tax amounts to potential prison sentences depending on the severity of their actions. Additionally, failure to pay payroll taxes will damage a person’s credit rating and make it difficult to obtain an IRS-approved payment plan or loan.

Getting back on track

Once a business has defaulted on payroll taxes, it may be necessary for them to enter into an agreement with the IRS to pay back the outstanding balance. This can include setting up a payment plan or establishing a trust fund to make regular payments until they settle the debt.

While resolving your unfiled payroll taxes, ensure that you stay current on your past returns, make any current payroll tax deposits, provide all necessary documentation and follow all IRS deadlines. You will also need to file Form 433-B, which allows you to give details about your financial situation so that the IRS can better understand what your options are for paying back the debt. It may be helpful to enlist a tax professional to guide you through this process.

If you owe back taxes, it is important to take action immediately and make all necessary arrangements with the IRS. Unpaid payroll taxes could have serious consequences, but if addressed quickly, you can resolve them in a satisfactory manner.