Employers have a number of duties that need to be fulfilled in order to run a legal and successful business in Austin. One of these responsibilities is that of collecting, reporting and paying payroll taxes, as required by both federal and state law. Additionally, if the employer is the IRS defined responsible party, the employer might be personally liable for taxes that have not been reported. Even if a payroll service is being used, a person is not relieved of their responsibility to complete their duty in a timely manner correctly.
There are a number of taxes that are included on the payroll. These include: federal and state income taxes that are withheld from the employee and paid to the IRS; FICA taxes that are withheld from employees and matched by employers; and federal and state unemployment taxes. In addition to paying these taxes, either yearly, semi-weekly or monthly, depending on the size of the payroll and legal requirements, these taxes also need to be reported on various IRS forms.
The responsible party for the company can be held liable if they willfully failed to withhold employee pay and payroll taxes or paid withheld taxes or other payroll taxes to federal or state agencies. There are a number of complicated penalties that can be imposed on the responsible party. For the failure to file Form 941 and other similar forms, a 2 percent fine is levied if it is one to five days late, 5 percent if it is six to 15 days late and 10 percent if it is more than 16 days late. A trust Fund Recovery Penalty is also levied against someone who did not pay payroll taxes when due, which could be 100 percent of the unpaid tax.
IRS tax law is complicated and businesses are already overwhelmed by the regulations they are required to follow in order to remain compliant with the law.