Payroll tax audits.
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News you can use: Every so often I publish some interesting developments in the tax area.
Outside payroll firms and/or the firms that hire them are responsible for payroll taxes. Sadly, sometimes these firms abscond with the money leaving their clients having to pay these payroll taxes. So what do you do?
If your firm uses a payroll agent such as ADP or paychecks etc., Check whether the agent has posted a fiduciary bond. Insist that all correspondence from either IRS or CRA comes to you and NOT to the tax authorities. Make sure that the agent deposits the taxes electronically for you to verify that payments were made from your bank statements
Moreover, IRS is expending its audits of payroll to make sure that workers are treated correctly as employees vs. independent contractors and required taxes have been paid. If you are treating some workers as independent contractors, make sure that you meet with a tax professional to ensure that you are classifying them correctly.
The sad fact is that if someone, such as a trusted employee, absconds with the money needed to pay your payroll taxes, you are still responsible . Thus, you get a double shaft: you lost the money due to theft and then are responsible for the taxes plus potential penalties. Ensuring that these are paid, is very crucial for business survival.