I hope you have managed to stay safe and well! We focus on resolving tax issues in Prince William County and throughout the lower Northern Virginia area.
Beginning January 3, 2022, it is expected that the IRS will unleash its wrath on all those responsible for payroll tax liabilities that have been given a pass (not assigned to a RO or Revenue Officer) during the pandemic. Yes, many people falsely believe that they have been operating underneath the notice of the IRS. However, Internal Revenue has not wanted to add undue burden to taxpayers that had distressed businesses during the “heart” of the pandemic.
Now, you can expect them to start issuing 30 day letters and subsequently assigning cases to ROs, in order to enforce full payroll compliance. Unfortunately, payroll withholding is the easiest loan to qualify for, for a small business, and the hardest loan to ever payback. In case you’re unaware, there are a number of penalties that generally apply when an employer fails to properly account and pay over the payroll taxes. These penalties are significant, and include the following:
• Failure to File: The failure to file a Form 941 or Form 940 is 5% per month, limited to 25%;
• Failure to Pay: The penalty for failing to pay over payroll taxes is .5% per month, limited to 25%;
• Failure to Deposit Penalties: the penalty for failing to make federal payroll tax deposits depends upon the number of days late that the deposit is ultimately made:
o 2% Deposits made 1 to 5 days late.
o 5% Deposits made 6 to 15 days late.
o 10% Deposits made 16 or more days late, but before 10 days from the date of the first notice the IRS sent asking for the tax due.
o 10% Amounts that should have been deposited, but instead were paid directly to the IRS, or paid with your tax return.
o 15% Amounts still unpaid more than 10 days after the date of the first notice the IRS sent asking for the tax due or the day on which you received notice and demand for immediate payment, whichever is earlier.
• Dishonored payment penalty: a penalty of 2 percent of the amount of the check or other commercial payment instrument generally applies if the check does not clear the bank. However, if the amount of the check or other commercial payment instrument is less than $1,250, the penalty is $25 or the amount of the check or other commercial payment instrument, whichever is less.
Just remember, you are not at the mercy of the IRS, and you have the right to a plethora of options and remedies to make Internal Revenue look at the full picture, as opposed to what’s in their own interest. We’re here to help you with all of your tax resolution/representation needs. Now and in the future. Don’t put off addressing your tax situation. You could be costing yourself more than you know by delaying. Feel free to contact us with any questions you may have in approaching your specific tax situation.