What If Employer Ignores Federal Payroll Tax Withholding Laws?

All employers in the United States are subject to federal payroll tax withholding rules and regulations as set forth by the Internal Revenue Service (IRS). Payroll taxes are considered to be trust fund taxes and are taking very serious by the IRS. In fact, payroll taxes are monies that are never considered to be those of the employer, and are simply collected and held by the employer for the IRS. So, when an employer fails to file and pay federal payroll taxes, many bad things can happen.

When Employers Don't Pay Their Federal Payroll Taxes

When employers willingly fail to pay federal payroll taxes, the IRS has a lot of different and powerful options at its disposal. The IRS can close a business for failing to pay payroll taxes and does not need a court order or permission from any other governmental agency. In some circumstances, the IRS may allow business owners to make arrangements to pay past due payroll taxes; however, the business and the business owner will incur very expensive fines, interest payments and penalties.

In very serious cases, the IRS will turn over the handling of a case to its criminal investigation division, which may pursue criminal charges being filed against both the small business entity and the business owner. They IRS's powers are broad and significant, and they are not known for much leniency when dealing with employers that willingly fail to pay payroll taxes.