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Are the Penalties Worse for Past-Due Payroll Taxes or Past-Due Sales Taxes?

corporate taxes

Your business faces several tax bills each month.  Failure to file either payroll or sales tax with the IRS can cost your business more than expected.

Collecting, reporting, and remitting payroll taxes are some of your key responsibilities when you have employees.  And if you forget or downright neglect your responsibility, your small business could receive a penalty for not paying payroll taxes.

Whatever your reason for missing your deposit deadline, not paying payroll taxes is a big deal to the IRS and other tax agencies.

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Key Insights

  • What is payroll tax?
  • What is a sales tax?
  • What are the penalties for past-due payment
  • What should you do if you fall behind on payroll or sales tax?

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What is Payroll Tax?

Payroll tax is the amount taxed on each employee’s salary.  Typically, this tax is paid through deductions in the employee’s paycheck.  Among the taxes included in payroll taxes are Social Security and Medicare taxes.

Failure to file payroll taxes and pay them in a timely manner is costly for businesses.  Best practices would be to schedule a time each month to review your payroll taxes and ensure the bill is fully paid.

What is a Sales Tax?

A sales tax is a consumption tax imposed by the government on the sale of goods and services.  A conventional sales tax is levied at the point of sale, collected by the retailer and passed onto the government.  A business is liable for sales taxes in a given jurisdiction if it has a nexus there, a brick-and-mortar location, an employee, an affiliate, or some other presence, depending on the laws in that jurisdiction.

If a business doesn’t collect sales tax as required by law, state and local tax authorities could hold it liable for the uncollected back taxes.  This can add up.

Collected sales tax must be held in trust until the seller can file a return and remit it to the proper tax authorities.  It’s a crime for a seller to keep collected sales tax revenue as one’s own, so businesses that fail to remit sales tax as required by law may face criminal charges in addition to financial penalties and interest charges.

 What Types of Penalties Can be Imposed?

The IRS is responsible for payroll tax collection, and has the ability to impose fines and interest payments for late taxes or failure to pay payroll taxes.  These can quickly add up, as they are added to the full amount due to begin with.  Working with a tax attorney can help you avoid tax penalties connected to payroll taxes.

Sales taxes are decided on a state and local basis.  Therefore, it does not fall under the purview of the IRS.  However, each state has the ability to collect sales taxes and go after you if you fail to pay.  An experienced tax attorney will have knowledge of each state’s practices and the required filing deadlines and information needed.  State and local authorities have the same ability to bring penalties against businesses as the IRS, with the same severity as well.

What Should One Do if They are Past-Due on Payroll or Sales Taxes?

The bottom line is you have to pay the IRS the tax that you owe, and you’re accountable for the application penalties when you fail to do so.  A tax resolution expert’s job is to make all of that happen as quickly and affordably as possible.

Contact an Attorney

If you are facing any issues with the IRS, it is imperative that you contact an attorney as soon as possible.  At the very least, they can at least tell you your options for handling your issue.  Contact the experienced attorneys at Ayar Law 800.571.7175 for free no-obligation legal advice about your tax matter.

 

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Executive Summary

Venar Ayar, Esq.

Venar Ayar, Esq.

Attorney-at-Law, Master of Laws in Taxation
Principal and founder, Ayar Law

Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.