If you own a business—small, medium, or large—you must be very familiar with laws that require the business to withhold from the paychecks of employees and certain independent contractors, specific amounts for Social Security, Medicare, and Income tax. Although the percentage has fluctuated in recent years, presently the employer must withhold 15.3% of an employee’s pay for Social Security and Medicare tax. Of this amount, half is the employer’s contribution to those funds, and half is the employee’s portion. Depending on the size of the business, these amounts must be paid to the IRS daily, weekly, monthly, quarterly, or annually, through the filing of various employment-tax forms and electronic payments.
The IRS quickly realizes when a business is falling behind on its employment-tax deposits, and usually contacts the employer within 6 months of a discrepancy. In fact, the IRS recently started an initiative to reach out to employers solely for the purpose of encouraging them to make timely deposits, because the penalties for not making those deposits are steep. Further, there are at least three different kinds of penalties related to employment taxes: failure to deposit, failure to file a return, and failure to pay the tax. Frequently, businesses unable to make timely deposits end up going out of business.
David A. Sprecace has more than 23 years of experience helping businesses through difficult times with regard to employment taxes. Call 303-454-8260 or email Dave at Dave@MyTaxLex.com to set up a phone consultation.