Penalties for Not Paying Payroll Taxes

Businesses and other organizations with paid employees are required to file payroll tax returns, withhold and deposit payroll taxes into a tax account and pay payroll taxes to the IRS. If these businesses and other organizations fail to pay these taxes, they may face a number of different criminal and financial penalties.

Amount

An organization that fails to file and fails to pay income, Medicare and/or social security payroll taxes on time may be required to pay penalties equaling up to approximately 33 percent of the amount owed.

Bankruptcy

An organization may be required to pay any and all outstanding payroll taxes even if the organization has already filed for bankruptcy and/or been declared bankrupt.

Criminal Charges

An organization, its owners and any individuals involved in collecting the payroll taxes for the organization may face federal felony charges if they intentionally do not file or do not pay.

Personal Liability

The owners of an organization may be held liable for the payroll obligations of the organization and may be required to pay a trust fund recovery penalty of 100 percent of the unpaid amount.

Warning

The IRS can assess penalties to an organization and/or its owners beginning on the day after payment is due, and these penalties will increase from 2 to 10 percent within 16 days of the due date.

Resources

• Things Business Owners Should Know about Payroll Taxes
• What Happens if You Don't Pay Your Payroll Taxes
• Payroll Tax Penalties
• About Payroll Tax Penalties