4.5 Billion Reasons Not to Delay Payment for IRS Payroll Taxes
In a cash flow crunch and thinking about delaying paying the IRS payroll taxes? There are 4.5 billion reasons not to do this. In the recently published “2013 Internal Revenue Service Data Book” it was revealed that the IRS issued 6.8 million penalties totaling $4.5 billion related to payroll taxes for the YEAR...
In a cash flow crunch and thinking about delaying paying the IRS payroll taxes? There are 4.5 billion reasons not to do this.
In the recently published “2013 Internal Revenue Service Data Book” it was revealed that the IRS issued 6.8 million penalties totaling $4.5 billion related to payroll taxes for the YEAR (yes, in ONE year not a multiple of years) ending September 30,2013. $4.5 billion – that is enough to pay for a new Navy destroyer, or buy approximately 562 mansions worth $8 million each. Of course that is nationwide, but what is the cost to you if you get a penalty from the IRS related to payroll taxes? According Publication 15 from the IRS the penalty is:
- 2% for deposits made 1 to 5 days late,
- 5% for deposits made 6 to 15 days late,
- 10% for deposits made 16 or more days late, and
- 15% on amounts still unpaid more than 10 days after the date of the first notice from the IRS.
For example, say that your bi-weekly payroll is $25,000. In this case, your estimated 941 taxes payable is going to be around $8,000-$9,000 depending on how much federal withholding tax there is. If you are just one day late that is a $180 penalty on $9,000. For that one day you are paying effectively 730% interest. And this is the penalty alone, in addition interest is added to the outstanding balance.
A company in a cash flow crunch that decides to delay making timely payroll tax deposits to the IRS, instead of holding off payment to a vendor, will be shocked by the bill they receive from the IRS. While it is never fun to get collection calls or risk losing a vendor due to late payment, it is potentially more costly to delay payment to the IRS. And don’t believe the myth that you can ask for penalty abatement from the IRS. Years ago, this may have been the case, but it is no longer.
What To Do About It? Stay Ahead of the Issue.
Cash flow management is an vital part of running a successful business. A cash flow crisis can be emotionally devastating and ruin a business. The starting point to avoid a cash flow crisis is creating and maintaining an accurate short-term and long-term cash flow projection. DS+B can help you know your current cash position, anticipate cash needs (both short and long term), and provide suggestions for efficiency in cash flow. Having a handle on cash flows will prevent you from wasting money on unnecessary penalties which will help your bottom line and allow you to put those funds to better use!
Disclaimer: All content provided in this article is for informational purposes only, and is subject to change. Contact a DS+B professional before using or acting on any information provided in this article