Lesson... always make your payroll deposits.
I just received a call from a client that told me that she was really short of cash and was not going to make her payroll deposit. I warned the owner that the penalties for not making timely deposits was really harsh. The penalty for even being a few days late is over 25%. On $18,000 not paid in, the penalty can easily be a whooping $4,500 even if it's just a few days late.
She said that this was not fair. I think the comment was, "the Soprano's don't even charge that much." Actually, in the eyes of the IRS, the payroll withholding is not really the owner's money but actually money that you have collected for the IRS; and you are in a "trust" position to give them what is theirs. In other words, it is like you stole their money.
Here is a case that shows what can happen. Click on the name of the case if you are interested in the details.
In other words... always deposit your payroll taxes timely.
Several people can owe a penalty for not depositing payroll taxes with IRS, a court says. A trucking company's CEO was personally liable for the undeposited taxes because he knew that the IRS wasn't being paid and the taxes were being used to pay creditors. The firms' treasurer was also held accountable because he wrote checks to other creditors using the withheld payroll taxes (Horovitz, D.C., Pa.). The IRS can collect the penalty from either person. The penalty is equal to the amount of tax not turned over to the Service. However, if someone who isn't primarily responsible for not depositing the tax pays a disproportionate amount of the penalty, that person can sue in federal court to recover from the other accountable party.
