IRS Penalties You Can Face for Unpaid Payroll Taxes

unpaid payroll taxes

As an employer, you are required to pay employment taxes to the IRS for each of your employees.  Failure to do this can result in penalties from the IRS.

Find out what taxes you should be paying to the IRS, what penalties can result from unpaid taxes, and how an attorney can help.

Key Insights We Will Discuss

  1. Types of payroll taxes you need to pay
  2. Penalties for unpaid payroll taxes
  3. How a tax attorney can help

Types of Payroll Taxes You Need to Pay

Employers are mandated by law to submit payroll taxes to the state and federal governments.  Some of these taxes can include:

  • Federal and State Income Taxes: These need to be withheld from each employee’s paycheck and paid to the IRS and state.
  • FICA Taxes: Social Security and Medicare taxes must be withheld from employee paychecks (either bi-weekly or monthly), as well as be paid by the employer.
  • Federal Unemployment Taxes: Employers must pay these quarterly or annually.  These are based on the gross pay of the employees.
  • State Unemployment Taxes: Employers must submit unemployment taxes to the state as well.
  • W-2: Employers must report employee annual wages and taxes for individuals on their W-2 forms.
  • 1099-MISC: Employers must report non-employee wages and taxes on 1099-MISC forms.

IRS Penalties for Unpaid Payroll Taxes

The IRS takes unpaid payroll taxes seriously, and therefore can assess severe penalties to employers for violations.  The IRS will likely send you a bill for the unpaid taxes, in addition to a fine.  You can also be subject to other civil and criminal penalties.

If an employer fails to submit payroll taxes, you are responsible for 100 percent of the back-payroll taxes you failed to previously pay.

Other penalties can be determined by how much you owe and how late the payment is.  The IRS uses this timeline to determine penalties:

  • 1-5 Days Late: 2-percent penalty
  • 6-15 Days Late: 5-percent penalty
  • 16 or More Days Late: 10-percent penalty
  • 10 or More Days After the First IRS Bill: 15-percent penalty

In addition to these penalties, you may also have to pay interest on the unpaid taxes.  These can range from 3 to 6 percent.

Failing to pay the owed taxes can result in the IRS placing a lien on your property and other assets in an attempt to collect the fees.

If the IRS determines you intentionally evaded taxes, you can also be subject to jail time.

Why You Need a Tax Attorney

If you have unpaid payroll taxes, you should seek the guidance of a tax attorney.  An attorney can help you determine how to negotiate with the IRS for lesser penalties, which information to provide to the IRS, and how to prepare a defense.

Contact an Attorney

When you need information on how to appeal an audit, call Ayar Law at 800.571.7175 to receive free, no-obligation tax advice from a tax attorney.

Executive Summary:

  • All employers are required to pay unemployment taxes to the federal and state governments.
  • Failure to pay these taxes can result in penalties from the IRS, including fines and potential jail time.
  • Hire a tax attorney to help you negotiate with the IRS to reduce your penalties.
  • Contact Ayar Law to get free, no-obligation legal advice at 800.571.7175

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.