Various 941 payroll issues can be very serious for employers - the consequences of not getting these important forms submitted on time and paying Internal Revenue Service debts on time can lead to very undesirable consequences. Employers submit the 941 form as part of their requirement to withhold taxes from your employees? paychecks for federal income tax, Social Security tax, and Medicare tax. Taxes withheld from employees are credited to employees in payment of their tax liabilities. An unfiled tax return, however, can lead to additional liabilities and more hassles for the employer.
In addition to the taxes withheld from employees, federal law also requires employers to pay any liability for their own portion of Social Security and Medicare taxes. Other 941 payroll issues further complicate the payment and liability, such as whether the payee providing services is an employee or an independent contractor. A payor, or the employer, is typically not required to withhold taxes on compensation paid to an independent contractor.
When an employer neglects to pay the withheld payroll taxes to the Internal Revenue Service for their employees, they will be assessed a Trust Fund Recovery Penalty. This is when many employers find it necessary to seek professional tax audit defense, because assessment of the Trust Fund Recovery Penalty involves a 4180 Interview for the missing taxes. Even if the owner or chief officer of the business is not involved in the collection, accounting or payment of taxes, they will still be responsible.
The penalty for an unfiled tax return and unpaid debt is 100 percent of the taxes owed plus interest for the period that the debt remained unpaid. And besides the 941, employers may also be required to submit a Form 945 for Annual Return of Withheld Federal Income Tax. This is where they can report non-payroll payments such as pensions, annuities and gambling winnings. It is important for employers to report all their taxes and turn in all the required documentation and payments on time, to avoid audits and penalties.