Payroll Tax Debts And Personal Liability

Employers have a number of legal and financial obligations with regard to their employees. One such obligation is the payment of payroll taxes. Failure to pay these taxes can result in significant penalties and interest, as well as personal liability for the business owner.

When most people think of payroll tax debts, they think of the business owner being personally liable for the debt. This may be true, but there are other ways that you can become personally liable for a payroll tax debt.


In this blog post, we will discuss the dangers of not paying your payroll taxes, and how to protect yourself from personal liability. We will also provide some tips on how to get out of this mess if you find yourself in over your head.


What's A Payroll Tax?


A payroll tax is a tax that is withheld from an employee's wages and used to fund social programs like Medicare and Social Security. The amount of payroll tax that is withheld from an employee's paycheck depends on their income level.


The employer is then responsible for remitting the taxes to the government. If the employer fails to do so, they may be subject to penalties and interest. In some cases, the business owner may also be held personally liable for the unpaid taxes.


This is why it's so important to make sure that you are paying your payroll taxes on time. Not only can failure to do so result in significant financial penalties, but you could also find yourself facing personal liability.


Who’s Considered a Responsible Person?


The IRS defines a "responsible person" as anyone who has the power to control the payroll and tax deposits. This includes, but is not limited to, business owners, officers, directors, shareholders, partners, members of LLCs, and anyone else with signatory authority over the business bank account.


How To Protect Yourself From Personal Liability


There are a few things that you can do to protect yourself from personal liability in the event that your business fails to pay its payroll taxes. One thing that you can do is to create a separate bank account for payroll taxes. This will ensure that the funds are not commingled with other business funds and can't be used for other purposes.


Another thing that you can do is to sign up for electronic payments. This way, the funds will be automatically withdrawn from your account and remitted to the government. This will help to ensure that you don't get behind on your payments.


In case you are self--employed, you can also take steps to protect yourself from personal liability. One thing that you can do is to make estimated tax payments throughout the year. This will help to ensure that you are paying your taxes in a timely manner.


Another thing that you can do is to keep good records. This way, if there is ever an issue with your taxes, you will have the documentation to back up your claims.


When you are facing payroll tax debt, it's important to take action immediately. The sooner you take steps to address the problem, the better off you will be. If you wait too long, you may find yourself facing personal liability for the unpaid taxes.


Does the 100% Penalty Apply to Self-Employed People?


The 100% penalty does not apply to self-employed people. However, they may still be liable for interest and penalties on the unpaid taxes.


When you are facing payroll tax debt, it's important to seek professional help. There are a number of options available to help you get out of this mess.


With the help of a qualified professional, you can get your business back on track and avoid personal liability for unpaid taxes.


How We Can Help


At Morris and Associates Tax Specialists, we have many years of experience helping businesses with payroll tax problems. We can help you to negotiate a payment plan with the IRS, and we can work with you to ensure that you are in compliance with all of your tax obligations.


Contact us today to schedule a free consultation. We would be happy to help you get your business back on track. If you have any questions about this blog post or any other tax-related matter, please feel free to contact us. We are here to help.


Best regards,

Kenneth Morris, EA

Call me: (678) 641-3193