Taxes are a major means through which the government of every nation earns revenue to finance the estimated expenditure budgeted for to enhance the living condition of the citizenry. Inability to adequately and timely file and remit taxes withheld from the wages and salaries of taxpayers within a firm is tagged Payroll Tax delinquency. The IRS classified this as a criminal offense and frowns sternly at it.
Payroll tax delinquency has been found to be caused by multiple factors ranging from fraud and embezzlement to sheer incompetence of the employee saddled with the responsibility of computing and remitting the payroll taxes to the IRS.
To curb the challenge of payroll tax delinquency, there are 7 simple ways;
The responsibility of computing and remitting the payroll tax of taxpayers within a firm has been left in the hands of employees lacking the professional wit to appropriately deliver on the job. This has led to delinquency in fulfilling the role and consequential penalties leveraged on the firm and individuals. To curb the challenge, a professional accountant must be engaged to handle this function. The accountant would deliver correctly and timely; curbing the delinquency.
Though the IRS has a monthly timeline for the remittance of taxes, the firm must set in-house timelines shorter than the one of IRS to be able to remit the payroll taxes as at when due. The shorter timelines would enable the firm to correct any attending errors or issues before the timeline set by the IRS.
The management of a firm must adequately supervise the processes; relatively the finance process within the organization to achieve expected objectives. This adequate supervision would help magnify grey areas such as delinquency in remittance of payroll taxes and would enhance correction of such within the timeframe provided.
When filing and remitting taxes withheld from taxpayers within the firm, all the relevant documents used for the computation of taxes like Invoices, Bank statement, YTD statement of Comprehensive Income, etc. must be made available to the IRS to verify the amount of taxes filed and remitted. These documents establish the authenticity of the computation, and where there is a need, allows the IRS to make clarifications and alterations. Such is reverted to the professional accountant that verifies the bookkeeping process and come to an agreement with the IRS.
The IRS has established procedures for filing and remitting taxes. The accountant overseeing the bookkeeping procedure must follow the established procedures of the IRS to avoid any claim of delinquency and appropriately file and remit payroll taxes. More importantly, the management of the firm should ensure that the procedures of IRS are domiciled into the firm’s finance process to ensure that as the IRS does, so does the firm. Such harmony of the process makes compliance with the IRS adequate and timely.
As an organization is a separate entity with its own identity, the personal expenses of the owners of the firm must be separated from the expenses of the firm to avoid avoidable double taxation and explanations. Personal expenses should be accounted for outside of the firms’ bookkeeping process. The bookkeeper must ensure safeguard against such mix-up and must flag such upon the spot.
Many times, the failure to file and remit payroll taxes exist with the exigencies that surround the business environment. There are allowances paid to the employees within the firm that the IRS maintains a silent stance on. Such allowances as the Public holiday allowances, Weekend allowances, Christmas bonus, etc. are paid to the taxpayers within the firm but not subjected to payroll taxes by the accountant handling the function. The failure to file and remit payroll taxes would not be solely on the firm but on the business complexities. These grey areas need to be ironed out with the IRS to ensure adequate compliance.
The penalties for Payroll tax delinquency ranges from paying much more than the tax as fine, forfeiture of assets belonging to the firm, to the accountant saddled with the responsibility of bookkeeping losing his/her finances and assets. This unwanted repercussion is avoidable.
Sticking to the 7 simple ways of curbing payroll tax delinquency listed above would make both firms and individuals avoid the penalties of non-payment.
Key Tax & Financial Services, LLC