What Are The Factors For Payroll Tax Liability?

When employers fail to pay payroll taxes to the Internal Revenue Service (IRS), a payroll tax liability is created. The IRS views the failure to pay federal payroll taxes in much more unfavorable light than it does other types of federal taxes.

When a Federal Payroll Tax Liability Is Created

U.S. employers create a federal payroll tax liability any time payroll taxes are not withheld and paid to the IRS - regardless if it is willful or simply due to a lack of funds to pay. A federal payroll tax liability is usually created when an employer fails to pay 940 or 941 taxes on time or not at all.

Employers are required to file payroll tax reports and make payments depending on the number of employees and the amount of payroll taxes withheld. Micro-businesses may be only be required to file payroll tax reports and make payments once a year, while larger businesses may be required to pay their income taxes the day after they pay their employees. However, most small businesses are responsible for filing payroll tax reports and making payments once a month.

A payroll tax liability is created the day after a tax payroll tax deposit or report is due. The IRS may assess fines, interest and penalties on a liability even only one day after the taxes due. The IRS is quite persistent and aggressive in pursuing payroll taxes that are owed to them as these taxes are considered to be trust fund taxes - meaning that the money never actually belongs to the employer and should not delayed for any reason.