Payroll Tax Compliance Tips

Business Survival Tip
Episode 36
By Carl Kleimann
March 31, 2010

Full Interview transcript

Carl: Hello business owners this is Carl Kleimann from Odyssey OneSource with another Business Survival Tip. More small businesses get into trouble with the IRS over payroll taxes than any other type of tax. They are a huge source of government revenue and the IRS takes them very seriously. The IRS actively looks for businesses that have fallen behind in their payroll tax deposits or filings. When they find a noncompliant business, the penalties can be severe.
An employer’s most important responsibility is depositing payroll taxes on time. Before you do that, however, you have to know:

What compensation is taxable?
When are your payroll taxes due?

On the subject of compensation, employers often overlook non-cash compensation such as a company car, company provided housing, and the value of life insurance in excess of $50,000. And severance pay and bonuses are often overlooked. There is a wealth of information on this subject available at irs.gov.

Your tax deposit schedule is based on a four-quarter “look-back” period which begins July 1 and ends June 30. If you reported $50,000 or less of payroll taxes for the look-back period, you make monthly deposits. If you reported more than $50,000, you make semi-weekly deposits. You may even be required to make daily deposits under certain circumstances.

The penalties for failing to withhold or deposit federal income tax and Social Security and Medicare taxes are severe and they can be personal. If your business cannot pay the unpaid taxes, the IRS will go after you personally. This is true even if you rely on a payroll service that fails to deposit on your behalf. For these reasons, this is a subject that commands your attention.

I am Carl Kleimann and this has been another Business Survival Tip by Odyssey OneSource, ranked as the number one Professional Employer Organization three years running by the Black Book of Outsourcing.
For more information on this and other issues affecting employers, please visit www.odysseyonesource.com