Posted On June 13, 2016

Small businesses and payroll taxes, part 2: issues that can arise

In the first part of this post, we noted how, as the owner of a small business, you have a lot on your plate when it comes to payroll tax compliance. That is one reason why you may utilize a third-party provider to handle payroll services.

But what happens if the third-party provider becomes insolvent or commits fraud? In this part of the post, we will address that question, as well as other payroll tax issues that can arise.

As an employer, it’s important to know that even if you have outsourced your payroll services, you remain liable if the third-party provider fails to make the required reports and payments to the government.

This is true regardless of the type of third-party service you use. You may be using a payroll service provider (PSP). You may be using a reporting agent or a Section 3504 agent. The answer is the same: you remain liable if they fail in their duties.

Of course, there are other issues that can arise as well. You may have fallen behind on your payroll taxes due to cash flow problems in your business. Or you may have encountered confusion regarding how your personal taxes obligations relate to your business taxes.

Regardless of what the precise issue is, a knowledgeable tax attorney can help you seek a satisfactory resolution. This is especially important if the IRS is moving toward taking collection action against you. Your attorney can gather the facts, explain the options, and deal with the IRS on your behalf.