QUESTION ON PAYROLL DEPOSITS NOT MADE

Larry, what are your thoughts on this. My salon is not doing very well. I have some serious cash flow issues. I can't make my payroll tax deposits. How much trouble am I in?

Ted

Ted, sorry that you are having problems. My best advise is to do a cash flow budget to determine if there is a light at the end of the tunnel. As far as missing the deposits, this is a big mistake.

Failing to deposit withheld income taxes, Social Security and Medicare contributions, and employer matching amounts on time can be expensive. The government wants its money by strict deadlines. Penalties accrue quickly if your business or organization misses deposit deadlines. As far as the government is concerned this is money that you are holding from them. Not giving it to them timely is paramount to stealing. That is why the penalties are so high.

The penalty for not making deposits on time is:

1 to 5 days late, 2 percent of amounts due.
6 to 15 days late, 5 percent.
16 or more days, 10 percent.
15 percent if notice from the IRS is ignored, plus interest on the amount not deposited, plus 100 percent of the uncollected amounts if the failure to deposit is willful.

Note this grave, personal danger: These penalties can be levied personally against all responsible individuals in a business or organization. The corporate veil is no shield in these situations. Any individual with a responsibility for getting the money to the government on time faces possible exposure to penalties and fines. This includes non owners.

Let me know if there is anything I can do to help.

Larry Kopsa CPA

BEWARE - A CLIENT WANTS TO STEAL FROM THE IRS

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.