The phrase “making payroll” is commonly heard in the small business world. It essentially means managing a small business so that paychecks are delivered to employees on time, even when the unexpected occurs. In many cases, payroll can be one of the most difficult duties on a small business owner’s to-do list. One thing certain to make this task even harder is a payroll tax mistake that can lead to major, undesirable problems with the IRS.
The IRS is not very receptive to excuses when it comes to timely payment of payroll taxes, and neither are state tax authorities in the 41 states that have state income tax withholding rules.
When a cash crisis occurs, it can be tempting to “borrow” money withheld from employee paychecks as a short-term solution for urgent expenses. But try not to give into this temptation. The IRS views this as a cardinal sin, and it can result in both civil and criminal penalties that are difficult for any small business owner to get past.
Here are 5 things that all small business owners should know about payroll taxes to avoid potential IRS problems: