Payroll and Tax Lien
Payroll broadly refers to the part of business involved in paying employees. In payroll, companies manage deposits into retirement accounts, make sure that checks are sent out to all employees for the proper wages, and ensure that the business itself is setting aside money for taxes like social security. However, if a tax lien by the IRS is involved, the payroll department often needs to take extra steps for lien payment. Even businesses themselves can be affected by tax liens because of mistakes in payroll.
Other People Are Reading
-
Tax Lien
-
A tax lien is a type of lien that is created by the U.S. government, specifically the IRS. These liens, or claims of payment, are for unpaid taxes and have a very high priority as far as liens go. This means that the lien will almost certainly be supported in court and lead to a garnishment of wages. The court acts directly in garnishment, targeting guaranteed future income. Rather than collecting from bank accounts (which does not work if the individual does not have cash reserves) the wage garnishment is collected directly from the paycheck.
Requirements and Limitations
-
The tax lien puts the burden of payment on the business itself. The payroll department must remove a percentage of wages and send them to the IRS as part of the garnishment process before sending the remaining amount to the employee. The garnishment order will specify the percentage that must be paid. IRS laws limit the amount that can be collected, leaving the employee enough money for living expenses based on marriage status and the presence of any dependents.
-
Payroll Tax Lien
-
Businesses can also suffer from tax liens. Payroll must pay out Social Security, Medicare and similar taxes when paying employees. It is the responsibility of the business to withhold these taxes and send them to the IRS. If a business does not send in the money that is due, the IRS will take out a tax lien and file a suit for collection from the business just like it would for an individual.
Penalties for Payroll Liens
-
The penalties involved for payroll liens directed to the business itself are very high. The IRS views the business as a trustee of the funds meant for taxes and sees unpaid taxes and an attempt by the business to both break the trust and claim money that does not belong to it. As a result, a payroll tax lien usually seeks the amount of money owed on taxes, plus a 100 percent increase for improper action.
-
