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Payroll Tax Audits Target Businesses

Friday, September 3rd, 2010

Earlier this year, the IRS began its program of auditing businesses for compliance with payroll tax reporting and payment. As part of its National Research Program to gather statistics about payroll tax compliance, the IRS is examining 6,000 businesses large and small, 2,000 each year starting earlier this year. This study is part of their push to step up collection of unpaid payroll taxes. The second round of selection will take place at the end of 2010, and marks a continued increase in business audit frequency.

Even compliant employers face the possibility of being selected for these audits, incurring the extra time and expense of proving compliance. At a time when many businesses are struggling, the added burden could be disastrous.

The IRS is very aggressive in collecting past-due employment taxes because they are considered to be the government’s money that the employer is resonsible for collecting and remitting. Employers who fall behind on their payroll taxes face the highest penalty rates the IRS can impose, adding huge amounts of debt in a matter of months. Additionally, the IRS is empowered to file liens against property, seize funds in bank accounts, and divert payments by the company’s customers to collect payroll taxes. If the business cannot pay, the IRS will collect from the owner or other person responsible for payroll taxes, in some cases imposing civil or criminal penalties. In short, delinquent payroll taxes can shut down your business.

If you are thinking of going up against the IRS on your own, think again. You need experienced representation to keep the IRS from crippling your business. Depending on your situation, it may be possible to reduce the penalty amount, although the tax liability is rarely reduced. If you are behind on your payroll taxes, call for help before the IRS contacts you. If you receive a notice or call from the IRS, a timely and appropriate response is required. Help is available, and it can make a difference in the resolution of the problem.

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Tags: IRS, payroll, small business, tax, tax audit, withholding

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