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IRS to Step up Penalties for Delinquent Payroll Taxes

Employers owed the Internal Revenue Service approximately $14.1 billion in delinquent Social Security, Medicare and individual federal income taxes that they had withheld from employee paychecks as of June 30, 2012, and the Internal Revenue Service is being urged to do more to assess penalties against them.

With no surprise, approximately $13.5 billion of the delinquency related to employers that process payroll on their own or have control over their own tax disbursements.  A very compelling reason to consider outsourcing your payroll is the fact that most employers that are currently processing payroll themselves are utilizing a payroll software program and yet the penalties and delinquencies are still higher than ever.

New reports from the Treasury Inspector General for Tax Administration found that the IRS’s penalty actions against employers who don’t remit payroll taxes are oftentimes neither timely nor adequate. When a business does not remit taxes withheld from its employees, the IRS can collect the unpaid taxes from the individuals responsible by assessing a penalty along with interest.

The report claims that the IRS’s actions were not always timely or adequate in 99 of the 265 cases it reviewed in a statistically valid sample of cases. For 59 of the 99 cases, the untimely actions averaged more than 500 days to review and process the penalty assessment. That’s 1.4 years before the IRS starts their review…..  When the penalty assessments are not made in a timely way, taxpayers’ financial ability to pay can decline and the IRS’s chances of collecting the overdue taxes decrease.

That’s all about to change.  The IRS plans to make programming changes in its Automated Payroll Tax Recovery system to ensure it works more efficiently and it will provide additional training to all their managers. Emphasis is being placed on managers to increase their level of monitoring delinquent cases and ensure that revenue officers take more frequent penalty actions.

Hopefully with the higher level of scrutiny, more training provided to IRS agents and enhanced payroll tracking systems the level of delinquent payroll taxes goes down dramatically over the coming years.

If you are still processing payroll on your own, it may be time to get quotes from third party providers.  Express Payroll is approximately 50% less expensive than national providers, 40-60% less expensive than regional providers and the same price as online self-service software (if utilizing direct deposit).  Get FULL service for self-service pricing! Call or email today at 877-774-3327 or

Image Credit: All Rights Reserved, Stephan Stanfel

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