You Could Be Personally Liable for Payroll Taxes

The IRS is very concerned about payroll taxes. They want to make sure if you are an employee working for a company, that the employer is withholding your payroll taxes and paying them over to the government. So one of the issues businesses have when they are going through a difficult time is they may potentially use those payroll funds to pay for other expenses to pay for the rent or SDG&E. They may have to go back just to keep the lights on to use the money that they have taken from the payroll from the employees to pay these other expenses.

When the IRS makes that determination, it is really important to understand how serious it can be. The IRS goes back and has a liability for the business. If the business owes, for example $50,000 in payroll taxes, it’s important to understand that you as the individual — as the officer, as the person that knew the operations were taking place and willfully did not pay the taxes over — not only are you a responsible person, but you willfully didn’t pay those taxes over you then can be held personally liable for those payroll taxes. It’s not a separate liability. If it’s $50,000 that is owed, you generally will personally owe about half of that. It’s a joint liability. So if you are paying it off and the business is paying it off, it will slowly reduce the balance. But payroll taxes can be a very complicated situation when dealing with the IRS.