PAYROLL TAX FILING PROBLEMS

When a business employs people other than just the owner, the IRS requires that business to make Payroll Tax filings each quarter. These Payroll Taxes correspond to the withholdings which must be made from employees wages plus the employer's required contributions, and paid to the Federal Trust Funds (i.e.- Social Security, Medicare and Unemployment Insurance.) These withholdings are also frequently referred to as 940 and 941 taxes, after the IRS forms used to file them. 

Payroll Tax filing problems arise for several reasons. An inexperienced business operator may not even be aware of the requirement of making Payroll filings - until the IRS catches up with them, that is. 

It more frequently happens, however, that an owner who is faced with a slowdown in revenue and the necessity of paying wages and other business expenses, mistakenly decides to suspend his or her quarterly Payroll Tax filings. Although this is a common occurrence, and understandable given such circumstances, the IRS essentially considers neglect of Payroll Taxes to be stealing from the Trust Funds. When 940 and 941 filings continue to be skipped, the IRS will take aggressive Collections action against the owner and/or the corporation, which oftentimes will force the business's untimely closure.