Businesses with employees are required to deduct federal tax withholdings and the employee’s portion of Social Security and Medicare taxes from their employees’ paychecks. These withheld taxes must be remitted to the IRS, along with the employer’s portion of Social Security and Medicare taxes.
Many small businesses who fall on hard times often find themselves unable to pay their payroll taxes when due. Most business owners are unaware of the significant civil and criminal penalties that can result from this critical misstep.
At Pro Tax Councel, our Houston tax lawyers can help you resolve your payroll tax obligations while minimizing your personal civil and criminal exposure.Contact our Houston-based firm today for a free consultation and case evaluation.
Trust Fund Taxes
The taxes that are withheld from employees’ paychecks are called trust fund taxes because the employer is holding those funds “in trust” for the employees. The employer has a fiduciary responsibility to remit the employees’ tax withholdings to the IRS. In the eyes of the government, an employer who fails to make those payments is considered to have stolen from its employees.
Therefore, the IRS has a great deal of latitude in its ability to aggressively pursue these taxes. The Trust Fund Recovery Penalty is their most effective tool in guaranteeing collection of such liabilities. The IRS can assess a penalty equal to 100 percent of the employee taxes withheld by a business to any person in the company who is deemed to have been responsible for collecting and remitting those taxes to the IRS. Responsible persons are usually owners, but responsibility can even extend to employees in the company who had check signing authority.
If your business has unfiled payroll tax returns or unpaid payroll taxes outstanding, contact Pro Tax Councel today for a free consultation with a lawyer at our Houston, Texas, office. Our firm offers strategic advocacy for small-business owners with payroll tax withholding disputes.