A company that has employees must withhold FICA taxes from each paycheck. Colloquially known as payroll taxes, failure to pay them on time can lead to legal issues for you and your company. You may also need to see an attorney if you fail to pay them at all or use funds raised for anything other than paying the government what it is owed. Here are 3 times when a business needs to consult with a tax attorney regarding payroll taxes.
1- An Attorney Can Help If Employees Are Misclassified
One of the key reasons why you would want to classify an employee as an independent contractor is to avoid having to withhold payroll taxes. However, if the IRS decides that you improperly classified a worker, you could be on the hook for back taxes that weren’t withheld. Your company may also be on the hook for penalties, interest, and other sanctions.
Legal counsel may be able to explain why the IRS reclassified an employee and how your current balance was calculated. In addition, legal counsel may also be able to work with the IRS to create a payment plan or to settle any criminal case that might arise.
2- An Attorney May Help if Payroll Taxes Are Embezzled
Each pay period, you’re required to withhold 7.65% of an employee’s earnings and remit that amount to the federal government. Of course, it can be tempting to simply keep that money and do whatever you want with it. In such a scenario, you could face both civil and criminal charges for willful evasion of paying taxes.
It’s also important to remember that the employee could get in trouble as well for not paying their taxes as required. Failure to remit payroll taxes might also make it harder for an employee to receive the benefits that they would otherwise be entitled to. Those benefits could include unemployment payments if they are laid off or Social Security payments in their old age.
Your attorney may be able to create a defense against the allegation that you willfully failed to remit payroll taxes to the government. This may result in criminal charges or civil penalties being dropped or reduced.
3- An Attorney May Help If You Miscalculate What Is Owed
Your company should speak with an attorney if there is an error in calculating how much to withhold. This type of error may occur because of a payroll software glitch or because you made a simple math error when trying to manually calculate how much to keep back.
Generally speaking, if there is no intent to commit fraud, you’ll likely be asked to pay the correct amount plus interest and penalties. In some cases, the interest and penalties might be waived for a first offense.
If you are having issues with payroll taxes, it’s important to stay ahead of those issues. An attorney may be able to work with you to create solutions that can minimize the amount of money paid to the government. Legal counsel may also work with the IRS to resolve any potential criminal issues that you face in a favorable manner.
