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Have your payroll taxes been paid?

Operating a business with employees carries with it a large number of responsibilities. One of the most important, if not necessarily the most pleasant, is ensuring that your employment payroll taxes are paid. This is accomplished via withholding on most employees' paychecks. While in most businesses, this is done automatically, there may be circumstances that could lead to that not happening.

This is unfortunate, as the consequences of noncompliance with the payroll tax can be particularly severe. In the worst case, it can lead to the IRS bringing criminal enforcement actions and a potential for significant fines and a criminal sentence.

The IRS is focusing more resources on the issue of noncompliance with payroll taxes in part because they are seeing a significant decline in receipts of these taxes, with an estimated $59 billion in delinquent payroll taxes on filed tax returns.

You may have received a 903 letter, which is often the first notice a taxpayer receives that they have failed to pay a quarter's payroll tax. This is the legal notice that informs a taxpayer they are in noncompliance and will be used to demonstrate actual knowledge of the delinquency should a criminal proceeding commence.

The Service is also implementing electronic notice through the Electronic Federal Tax Payment System (EFTPS), which can provide notice within as little as 48 hours to the taxpayer.

If this does not produce the payment, the IRS will then call regarding the matter. The final warning will likely come in the person of a Revenue Officer knocking on your door. This is a step you want to avoid.

You can also sign up for an alert sent via email that will notify regarding payment activity on your EFTPS account. Even if you use a payroll service or have a "trusted employee" in charge of these payments, taking a few minutes to review this payment activity is a good idea, as you are personally responsible for any noncompliance, whether it is intentional or inadvertent.

Source:, "IRS Employment Tax Enforcement: Three Traps for the Unwary," Josh Ungerman, February 12, 2016

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