Responsibility of Payroll Taxes

A person who is managing, or even assisting in managing, the operation of a business (be it internally or outsourced), should be aware about the responsibility of handling of payroll and especially making sure that payroll taxes are made on a timely basis, because if the payroll taxes are not paid on a timely basis the IRS has various enforcement tools on unpaid payroll taxes.

One mechanism that the IRS has is to assess what is called the “Trust Fund Recovery Penalty”.  What this tax penalty does is that the balance due on unpaid federal payroll taxes would become a personal responsibility of the individual who is responsible for paying the payroll taxes on a timely basis.  In other words, a person could be held personally liable and would owe these unpaid payroll taxes for a business, even if the business has been formally incorporated.   So who could be liable for this federal payroll tax penalty?  Well, it is any of the following individuals:

  • An officer or an employee of a corporation,
  • A member or employee of a partnership,
  • A corporate director or shareholder,
  • A member of a board of trustees of a nonprofit organization,
  • Another person with authority and control over funds to direct their disbursement, and/or
  • Another corporation or third party payer (e.g. a private payroll service provider, etc.)

This indeed a huge penalty to be mindful of, because if these payroll taxes are not paid timely, the IRS then has the ability to “pierce the corporate (or business) veil” and put any and/or all of these individuals personally liable for this payroll taxes.

So if you think that you are behind on these payroll taxes, or even think that you do not want to have such a responsibility for paying for payroll taxes, please contact us at info@kayatax.com, and would be more than happy to assist you on managing the payroll taxes, and even handling the balances on back payroll taxes.