| It is the nightmare scenario for every | | | | |
| business owner. A letter from the IRS arrives | | | | The process starts with a letter and then a |
| demanding payment for unpaid payroll taxes. | | | | phone call. If not corrected the an IRS agent |
| The statement list the amount owed along in | | | | will pay you a visit. If they determine your |
| addition to penalties and interest. Thousands | | | | business is salvageable they can work out a |
| of businesses are faced with this situation | | | | payment plan. If, however, they determine |
| every day. Even worse, many of these | | | | your business is failing then they can sell |
| companies are forced into bankruptcy every | | | | your assets to collect the money ahead of |
| year when they are unable to make the payment | | | | your creditors. |
| demanded. | | | | |
| | | | An even worse scenario exists. The IRS can |
| The IRS also considers the problem of unpaid | | | | peruse the business owner or the officers of |
| payroll taxes significant. "Payroll taxes | | | | the company for the unpaid taxes if it |
| represent a significant portion of the IRS's | | | | defaults. |
| accounts receivable," says Carolyn Stumpf, a | | | | |
| spokeswoman for the agency. Fines for a | | | | With such a complex system and such steep |
| business that collect the taxes but fail to | | | | penalties it is not surprising that so many |
| pay the IRS are significant. The IRS | | | | companies are turning to payroll services to |
| considers this their money that is simply | | | | help them navigate the payroll tax maze. But |
| held by the business. | | | | what criteria should you use to find the |
| | | | right service? |
| But most unpaid payroll taxes are a function | | | | |
| of mistakes rather than deception. Depending | | | | Liability - If there are ever mistakes will |
| on the size or your company the time to file | | | | your payroll company stand behind you and pay |
| is quarterly, monthly or even the day after | | | | the fines or do you maintain the liability |
| payday. Missing the due date by even one day | | | | for any errors? You also want to make sure |
| can generate a sizable fine. Knowing what to | | | | they have the financial security to backup |
| forms to file and when is scheduling problem | | | | their promises if ever needed. |
| for a business owner with a million other | | | | |
| things they are working on. | | | | Access - How will you enter your payroll |
| | | | information? Some services have websites or |
| Timing is not the only problem. The tax rates | | | | you may need to call it in to their |
| that must be withheld are a moving target | | | | representative. |
| that often changes as often as congress is in | | | | |
| session. There are rates for Social Security | | | | Customer Service - If there are ever any |
| and Medicare taxes that have rates for | | | | changes you need to make how easy is it to |
| withholding from the employee and the | | | | contact the service. Make sure you can get a |
| employer contribution. These two taxes sum to | | | | real person on the phone if that is ever |
| the Federal Insurance Contribution Act, FICA. | | | | needed. |
| | | | |
| Federal Unemployment Tax and Federal Income | | | | Price - Your costs will primarily vary by how |
| taxes must also be collected from each | | | | many employees you have and how often you run |
| employee. And that is just for the federal | | | | payroll. Make sure you ask about any |
| government. There are also taxes that must be | | | | additional charges like check delivery or |
| collected for the state and even some local | | | | quarterly filing. |
| governments. | | | | |
| | | | By getting several quotes and doing some due |
| The various rates, numerous schedules and | | | | diligence you will be getting a good payroll |
| countless forms are enough to make a business | | | | service at a reasonable price. Now you can |
| owner's head spin. But the failure to get it | | | | back to running your business instead of |
| exactly right is even scarier. | | | | untangling the payroll tax knot. |