IRS’s Top 3 Targets for Small Biz Owners (2024)
Let’s talk about the Top 3 Targets the IRS is very concerned about coming into next year. Spoiler alert: each is related to payroll.
#1 – Worker Classification (Form 1099 or W-2)
You may have workers for whom you report earnings on Form 1099. But if you exercise a lot of control over their work, then maybe they should really be reported on Form W-2. And that’s one area of concern for the IRS. In the new year, the government will conduct thousands of audits to reclassify Form 1099 workers to Form W-2 employees.
That way, the IRS can collect tax from the business, not the individual worker or employee.
#2 – Payroll Tax Settlement Agreements
The second IRS priority is collecting delinquent payroll tax. If you are months or even years behind, then starting the new year may be the best time to fix the problem.
Consider starting a relationship with a payroll company. This way, your new payroll company can begin fresh without the confusion of payroll problems left over from another quarter or year.
Remember, at the beginning of the year, make it a priority to settle the payroll back taxes. You can even stay in business, without closing your company. And get serious about letting a professional handle processing your payroll.
The saved time, trouble, and accuracy are worth the cost. Even Tax Law Offices uses a payroll company! If you don’t know how to do it, just call me. I’ll spend the time. I’ll spend 30 minutes with you explaining what you need to do.
#3 – (Really Nasty) Penalties for Unpaid Payroll Tax
The last priority here is a series of Personal Responsibility “penalties” for failure to pay payroll tax. And they are a big deal.
For reference: There are two Internal Revenue Code (“IRC”) Sections to worry about. There is IRC Section 6672, and then IRC Section 7203. You will see the same language in both of those sections 6672 and 7203.
One of them gives you a financial penalty for a big portion of those payroll taxes. Basically, you can be held responsible for any taxes withheld from your employees’ paychecks if they were not paid over to the IRS or state.
The other one gives a criminal penalty. When I say criminal, the statute discusses jail time and really big fines. (Yes, business owners can be sent to prison over payroll taxes!)
If you are behind on your payroll tax, you really should know about these penalties. They could become an unfortunate life-changer. So just be aware.
Good luck to all of you, going into the new year.
PS: If you have these problems, please ask for help. Seriously, just call us at 312-212-1000.
Or connect with us at Stop IRS Problem.com.