As of 2022, the IRS is cracking down on employers and payroll taxes. If you are a business owner who has failed to send the IRS your employees' Medicare and Social Security contributions, the IRS will very likely come knocking at your door—and they won't go easy on you.
Penalties for failing to file and pay payroll taxes can be steep. Willful failure to pay can even lead to jail time. What happens if you don't pay your business taxes on time, and how likely is it you could get a prison sentence if you don't pay?
Business Tax Penalties
The IRS has several penalties it can impose on you or your business if you have unpaid payroll taxes, including:
- Tax fraud penalties
- Trust Fund Recovery Penalty (TFRP)
- Failure to pay penalties plus interest
- Underpayment penalties plus interest
- Accuracy related penalty
- Audit penalties
- Failure to file or late filing penalty
- Deposit penalties
If the IRS considers your case to be tax fraud, you could face criminal charges. Criminal charges can come with high fines or jail time.
Criminal Penalties for Unpaid Payroll Taxes
When you owe payroll taxes, the IRS generally assigns a revenue officer (RO) to your case. The RO may impose a civil penalty, but they could also refer it to the criminal investigation (CI) division. Historically, the IRS has reserved criminal charges for employers with huge sums of unpaid business taxes. Since the IRS is cracking down on payroll tax liabilities in 2022, more business owners may find themselves with criminal charges and prison time for their unpaid taxes. The length of the sentence varies depending on how much an employer owes.
Why Small Businesses Could Be at Risk
If you're a small business owner in Rockville, Annapolis, Columbia, Frederick or Baltimore with few employees, you probably don't think you're a target for the IRS. However, small businesses tend to be more vulnerable because they lack the resources or personnel to ensure taxes are filed and paid on time. They also tend not to have large teams of attorneys to assist if something goes wrong. If you own and operate a small business and don't feel you have a handle on your payroll tax situation, you should know that the IRS might be looking at you.
How a Tax Attorney Can Help
If you have been contacted by an IRS RO and feel worried about your business's payroll taxes, you should consider consulting with a tax attorney. These situations can move quickly, and you don't want to deal with a tax liability problem while trying to run a business. Tax attorney Juda Gabaie specializes in helping employers with their business tax liabilities. He can review your situation and devise a strategy to take the IRS's target off your back. Call Gabaie & Associates, LLC today at (410) 358-1300 to schedule a free consultation and see how we can help your business.