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Failure to pay employee payroll taxes

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As the owner of a Missouri business, one of the most burdensome tasks you must oversee is the paying of taxes to the federal government. You may deal with sales tax, property tax and income tax, as well as taxes that are specific to your product or service. However, the IRS may be most concerned about receiving your share of payroll tax.

Since your company deducts these funds from your employees’ paychecks, the IRS considers failure to turn over those payments among those most egregious of all tax crimes. The penalties for failing to pay federal payroll taxes can be quite severe unless you can prove you were not responsible for the payments or the mistake.

Be aware of the penalties

If you pay employees to work in your company, the law requires you to deduct the appropriate tax from their salaries and hold it in a separate trust for the IRS. At tax time, you send that money to the government.

When the IRS discovers your business did not pay the full amount of payroll tax it owed, the government will fine you – or whoever was responsible for making the payment – 100 percent of the amount withheld from workers’ paychecks that you failed to send to the IRS. It is possible that the responsible person will face criminal charges.

Who controls the money?

If you are your own accounting department, the weight of the offense and its penalties falls on your shoulders. However, like many business owners, you may delegate these duties to others. Your accountant, partner, shareholder or bookkeeper may have control over the finances, asking you for a signature on a check whenever necessary.

Nevertheless, you may not be relieved of responsibility just because someone else does your payroll. The IRS will look at several factors to determine if you or others should face penalties for failing to submit employee taxes, for example:

  • Are you an officer or a director in the company?
  • Do you have a financial stake in the business?
  • Do you take an active part in the daily management of the company’s affairs?
  • Is it your responsibility to hire and fire employees?
  • Do you determine the methods and routines for paying your company’s debts and taxes?
  • Do you have regular control over financial logs and bank accounts for the business?

The more evidence there is that you are an active participant in the financial aspects of the business, the more likely the IRS will look at you as one who may be responsible for the non-payment of payroll taxes. If you fear you may be implicated in a scheme to willfully withhold employee taxes from the IRS, you would benefit from the counsel of a Missouri attorney.

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