Payroll taxes are the taxes that employers pay on their employees’ behalves. This money is withheld from the employees’ paychecks and used to fund federal and state programs like Social Security, unemployment compensation, Medicaid and Medicare, and Workers’ Compensation benefits. The payroll taxes withdrawn to fund Social Security and Medicare are collectively withdrawn as the Federal Insurance Contributions Act (FICA) tax.
Failure to pay payroll taxes may be deemed an act of tax evasion. This is a criminal charge that can lead to penalties like jail time and asset seizure. An employer may also face civil penalties for failing to pay their payroll taxes, such as tax liens and levies. In any case where an employer is facing one or more of these penalties, it is in their best interest to work with an experienced tax lawyer to determine all of their legal options and which is best suited to their case.
Payroll Tax Violations
A few examples of payroll tax violations that the Internal Revenue Service (IRS) can discover during an audit include:
Misclassifying employees as independent contractors. When an employer does this, they may be required to pay the payrolls taxes they avoided by misclassifying employees and face additional penalties;
Failing to file payroll tax returns;
Pyramiding. This occurs when an employer withholds payroll taxes from employees but does not pay the IRS these taxes, essentially stealing from the employees’ paychecks;
Avoiding paying payroll taxes by paying employees in cash and failing to withhold and pay these taxes; and
Filing falsified payroll tax returns.
Potential Solutions to your Payroll Tax Issue
The right solution to your payroll tax issue depends on the nature of your violation. A possible solution for your case could be one of the following:
Working out an offer in compromise with the IRS to repay a reduced debt;
Deferring the tax debt so you have time to recoup the money you need to pay it off;
Obtaining a release from a tax lien or levy imposed on your assets or company. This could involve obtaining a business loan to pay off the debt;
Creating an installment payment plan with the IRS to steadily pay off the debt over the next few years;
Determining if you are still required to repay the debt. If the statute of limitations for the IRS to collect the debt has expired or the debt cannot be collected for another reason, you could avoid having to repay it; and
If you are facing a criminal charge, you will need to develop a legal defense strategy for your case.
Work with an Experienced Chicago Payroll Tax Lawyer
When you are facing payroll tax issues, work with an experienced payroll tax lawyer to get them sorted out. Your lawyer can examine all the issues at play in your case and the applicable laws to determine the most effective legal solution for you. To start working with one of the experienced payroll tax lawyers on our team, contact North Suburban Legal Services LLC today to set up your initial consultation in our office.
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