Consider the scenario: your client withhold payrolls taxes from employee wages and plans to deposit them later. He keeps the money apart from your business’s other funds. But, he’s a busy business owner, and has a lot of tasks to deal with. He completely forgets your tax deposit due date, resulting in failure to pay payroll taxes and a late penalty fee from the IRS.
According to the US Department of Justice, about 70% of the annual revenue collected by the IRS comes from payroll taxes. Under reported and unpaid employment taxes account for approximately $72 billion of the U.S. tax gap. That’s why there are consequences when your business fails to deposit payroll taxes.
It is important for taxpayers to understand that the IRS is aggressive in assessing the late payroll penalty. Payroll taxes are the government’s money, and when the taxes are not paid, the government believes those who have not paid are taking its money. The government does not take this lightly and will not relent in its efforts to collect the amounts it is owed. For a business with numerous employees, unpaid trust fund taxes add up quickly, and the penalty consequently assessed against a responsible person can be huge. In addition, even bankruptcy will relinquish the charge.
Even worse, failing to pay payroll taxes can lead to criminal charges. A willful failure to pay over or collect tax is a felony punishable by up to a $10,000 fine or five years in prison, or both. However, the IRS reserves criminal charges for the most egregious cases, usually where the responsible person owned the business and embezzles the money for their own personal gain, rather than situations where an owner or other responsible person in a business that was facing hard times uses the money in an attempt to keep the business afloat. As the cases discussed below show, in a successful criminal trust fund prosecution, the responsible person is usually sentenced to prison time and required to pay restitution.
Don't let your clients run that risk of failing do their payrolls correctly. Let us, IMACO Insurance, handle the work for your clients the right, and correct way. For an insurance agency, offering a payroll service is a natural extension of your brand that will provide many marketing benefits. IMACO is uniquely positioned to offer you a turn-key opportunity that will enable you to offer a payroll service without any additional responsibility for operational or sales activities. So you can market a broader range of services to prospects and current customers without adding more staff or work.