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Understanding payroll tax enforcement in Ohio

Running a business often involves deciding what bills to pay - and when to pay them. Peaks and valleys in business are common in any industry. For instance, the change in the price of gas can impact a company in many ways -- from increased costs in obtaining supplies to a downturn in business as consumers cut back on spending. It is often tempting to delay paying bills when unexpected shortfall in revenues arises.

Earlier this year the Justice Department reminded business owners and others who are responsible for paying quarterly payroll taxes to the federal government of the dangers of failing to file their quarterly 941 or year-end 940 returns or failing to timely pay over employment taxes to the IRS.

The Corporate Shield Does Not Apply To Payroll Taxes

Even with a corporate shield, business owners, corporate officers, bookkeepers, treasurers and others who are tasked with the responsibility to withhold, account for and deposit employment taxes may be held personally responsible for any delinquent payroll taxes through trust fund recovery penalty assessments. The IRS has great power to shut down a business and seize assets. Moreover, criminal enforcement actions can arise related to the failure to pay over payroll taxes.

High profile cases involving individuals accused of deliberately diverting payroll taxes to pay for personal expenses may be tantalizing to news reporters. However there are many ways a business owner can run afoul of employment tax law.

Common Payroll Tax Problems

Common missteps that can lead to payroll tax problems and trust fund recovery penalty assessments include:

  • Paying other creditors before the IRS
  • Failing to deposit payroll taxes on time
  • Paying workers in cash without withholding taxes
  • Misclassifying workers as independent contractors
  • Failing to monitor outsourced payroll tax services

Even if payroll taxes are outsourced, or if someone else in the business handles these taxes, a stakeholder may be held responsible civilly and criminally for payroll tax problems. The Justice Department and the IRS frequently work together to enforce payroll tax laws. Business owners -- and essentially anyone who has check-writing authority on behalf of the business -- should consider seeking the advice and guidance of an experienced tax law attorney to protect their rights if they have reason to believe a payroll tax issue may be lurking in an entity.

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