Unfortunately, if your business refuses to pay its payroll taxes, there is a very good chance that the tax man cometh, and he comes with the full power of the IRS.

Every business has a legitimate responsibility to deposit payroll taxes accurately and on time. Keep reading to learn why you should get your payroll taxes in order, or brace yourself for the consequences.

Some of the most serious penalties face businesses across sectors that willfully decide to ignore payroll tax obligations:

Financial impact: Not only do steep fees and fines add up, but the IRS can also put a lien on your company’s assets, so this can have severe detrimental financial and operational impacts.

Legal penalties: In addition to facing significant civil liabilities, businesses that fail to deposit payroll taxes may also be subject to serious criminal penalties. Willfully misrepresenting your tax situation or committing tax fraud could lead to a felony charge and up to a $10,000 fine and/or five years in prison.

Moreover, companies that fail to address payroll tax liabilities could also suffer reputational harm, diminished employee engagement and lingering financial problems. Time-consuming payroll and tax audits can also be enforced by authorities.

Under typical circumstances, businesses must pay at least 90% of the taxes due for the prior year to avoid an underpayment penalty. Paying payroll tax obligations on time and managing prevents the prospect of serious repercussions while promoting a business’ overall fiscal health.

Tips for Avoiding Penalties for Payroll Taxes

The good news is there are multiple savvy strategies and industry best practices for dodging payroll tax penalties that are relatively easy for businesses of all sizes to follow. To ensure your company deploys the following techniques:

Keep accurate records

Businesses looking to avoid penalties, payroll tax, and other issues must keep accurate and complete payroll records. This can be in the form of records like employment forms, pay records, timesheets, current employee information and other related payroll documents. Likewise, businesses should regularly audit their paper trail to confirm that their records and payroll are in working order.

Consider software tools

A lot of these tools come with tax compliance departments, and they can do a lot to ensure that you never miss a deadline. Most tools can keep up with payroll and tax calculations, withholdings, and deductions while automating the filing and payment of business payroll taxes (federal, state, and local). And it doesn’t have to cost a fortune.

Conduct regular staff training

So why not react proactively rather than wait until there is an emergency before you train your staff on how to follow proper payroll processes? Instead, companies should institute regular training of employees on payroll management, payroll tax obligations and error corrections. Rather, all employees should be properly trained and educated to mitigate problems before occurrence. Education could do a lot to prevent compliance questions.

Consult with tax professionals

When in doubt, speak to a tax professional, including a payroll service provider, a certified public accountant (CPA) or enrolled agent (EA). You may plan to have your tax obligations prepared, paid on time and your business strengthened with sound financial practices and procedures with the help of an expert. With their expertise of taxes, professionals provide valuable guidance that is essential in order to keep your business’ finances on the right track.

And be sure to keep track of any updates or announcements from the IRS and other tax authorities (such as state or localized governments) to ensure your reporting complies with all new tax rules in the location you operate.

Avoid payroll tax penalties for peace of mind

While the penalties that accompany payroll missteps can be considerable when tax time rolls around, much of that calculation and deduction work is managed by many online payroll providers, meaning businesses can sidestep tax deposit snafus in the first place. Some vendors may even keep you compliant with federal regulations and local requirements, and manage mandatory state new-hire reporting as your team expands.

Want to simplify your payroll? Our team is ready to respond with answers to your questions, and we look forward to partnering with you as your business grows and succeeds.

This article is for informational purposes only and should not be relied on for tax, legal or accounting advice. Please consult your own tax, legal and accounting advisors for formal consultation.