Not Paying Payroll Taxes? You Could Be Personally Liable

The economic downturn caused by COVID-19 has been a struggle for small businesses, but STLTaxLawyer Mark Milton explains why, especially during tough economic times, small businesses should comply with their payroll tax obligations.

The Trust Fund Recovery Penalty allows the IRS to impose personal liability on the person at a business who makes the decision to avoid and not pay payroll taxes, such as the owner of the business, the bookkeeper, the accountant, etc. Failing to withhold, account for, and pay over employment taxes can result in personal liability and/or prison time.

Payroll taxes are amounts withheld from an employee’s paycheck, such as federal taxes, Social Security, and Medicare. Most employees assume those tax withholdings are automatically sent to the IRS, but some employers, especially ones struggling to keep up with bills, may not be paying those taxes.

Depending on the size of a business and its payroll, businesses may only need to pay those taxes to the IRS on a quarterly basis. Employers may have withheld that money from the employee’s paycheck, at least on paper, but are still responsible for turning over that money to the IRS.

If you’re a struggling business owner with cash flow issues, then you may find yourself delaying payment to the IRS because you may think it’s more important to pay your key suppliers and employees first in order to keep the business afloat and then deal with the IRS later. The problem is sometimes businesses don’t get through those tough times, need to shut down, and still can’t pay the IRS.

If you need a tax attorney to help with your payroll tax issues, then give us a call today at 314-394-3370 for a consultation to discuss your options.

Click this podcast link to listen to STLTaxLawyer Mark Milton discuss more about how to avoid the IRS Trust Fund Recovery Penalty.