941 payroll tax problems are one of the most common issues that the IRS aggressively pursue their collection activities on. Whether it's from ignorance, accident, or design, there are plenty of small business owners, and even some large business entities, who end up in trouble with the IRS because they didn't handle their 941 payroll taxes correctly.
A lot of times the 941 payroll tax issue results from either not filing a required payroll tax form on time, or not filing it at all. If you have paid your payroll tax deposits, and simply had a problem with a form, the IRS is usually willing to let you clear it up simply by getting the form to them as quickly as possible. You may be assessed a small penalty, but that's not always the case. The real 941 payroll tax problems are those that result from failing to make the required payroll tax deposits on time and in the correct amounts. If you own a business that has employees, even if that employee is just you and/or your spouse, you have specific deposit requirements. These are the most common:
1.Social Security tax
3.Federal income tax
4.Federal Unemployment tax
In addition to withholding the money from your employees' wages, and depositing that money on their behalf, you also have the requirement to pay a matching amount for some of those taxes. Some of these tax liabilities are reported to the IRS quarterly via IRS Form 941, and others are reported annually by using Form 940.
Don't confuse reporting with depositing. These are two entirely different processes. Reporting tells the government how much you owe. Depositing is the process of actually sending them the money in a timely manner and in the correct amount.
Depending upon the size of your payroll, you're required to make payroll tax deposits either semi-weekly or monthly. The IRS makes this determination the first time you file your taxes. It is not up to you to choose one.
Business owners who get into trouble over payroll tax matters usually do so because they skip one or more deposits. Whether you simply forgot to make a deposit, or you didn't have the money and you planned to "catch up later," the end result is the same as far as the IRS is concerned. Once you miss even one deposit, you start receiving an automated series of letters. These letters may start out friendly enough but, before you know it, they start threatening civil and legal penalties including interest, penalties, fines and, in extreme cases, criminal action.
What to Do if You Have 941 Payroll Tax Problems
If you can solve the problem immediately either by filing the form, or making the deposit, and the IRS isn't hammering you with huge fines and penalties, just do it. That's the cheapest and easiest solution.
However, if your payroll tax problems have escalated to the serious level, you need to engage an experienced tax professional to represent you before the IRS. An experienced Licensed Taxpayer Representative has undergone specialized training and has the knowledge and experience required to represent you before all administrative levels of the IRS.
Often they can negotiate a settlement between you and the IRS. And while that settlement will never include relieving you of the responsibility to make the tax deposits you failed to make, your tax representative may be able to successfully remove or reduce the amount you have been assessed in fines, interest or penalties.