Whether not we all dread the IRS, or you own a small business
They always seem to look for more money and if you will not pay them or pay them late they’ll penalize you straight into the poor house. As an individual biz owner your worries about the IRS can be much greater being that you’ll now have to deal with employee payroll taxes. With employees comes more taxes to pay and returns to file. It is perpetual. Death and taxes as they say are a single two inevitables in lifetime. Oh how true. Besides having to pay those taxes and file those returns mostly there’re a couple of other stipulations that also come with those responsibilities that you may not be aware of.
For those of you that are new to running a business and having employees I’ll give a quick rundown of how employee taxes work. Once you opened your doors and started doing business you put yourself in position to pay payroll taxes. Whenever filing 941 quarterly tax returns, W3 yearly returns, and issuing ‘W2” What you the amount of employees in your business grows the larger your tax bill becomes. Because not only do you have to pay the taxes you withheld but you’ll need to pay the matching taxes as well. As your tax bill grows the IRS will require you to send those tax payments in more often. You’ll go from paying on a quarterly basis to a monthly basis, down to a biweekly time frame. On top of that, as your tax burden grows the time your given between payments shortens up by a lot.
I would like to ask you something. Not that you can’t handle all that pressure though right, am I correct? Well as if that wasn’t enough we have one more piece of good news for you. Even if your business was to go bankrupt and you still owed taxes you can be held personally liable by the IRS. The bankruptcy court will probably not protect you from having to pay those taxes. Due to cash flow problems trouble arose in paying bills. Actually, the trouble extended to paying the payroll taxes on time. Finally the owner was forced to file for bankruptcy protection and close the doors. A well-known fact that is. Once the paperwork was filed the bankruptcy court took control of all the assets. As there wasn’t enough money in the bank card to pay the taxes in full anyway they went unpaid and were listed as the top creditor in the bankruptcy court filing. This is the case. The problem is being the overly large IRS bureaucracy. Actually, you see the court notifies creditors of the bankruptcy and requires them to file a claim. If they don’t after that, they can’t receive most of the proceeds from the sale of assets. Now since the IRS was owed taxes they are supposed to receive all the proceeds up to the point of the taxes being paid. Although, they are still just a creditor and must file a claim. With that said, in this particular case a claim was not filed. Most likely the court documents were lost in the system.