This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Buying Time on Small-Business Taxes

Delaying payroll taxes is even harder and comes with its own risks for owners and their companies. "As an employer, you have a fiduciary responsibility to withhold your employees' share of Social Security, Medicare and federal income taxes," says Doug Cates, a partner at the accounting firm Cherry, Bekaert & Holland and leader of its Owner Managed Business group. "The employer is acting as the trustee of a trust fund."

Given that fiduciary role, you can rack up penalties and interest of up to 25% a month on the amount owed if you don't pay those taxes on time. Even worse, the taxes are not dismissible in a bankruptcy, meaning the IRS can collect directly from an owner or an employee considered a "responsible party" (which could mean simply that they had the authority to sign paychecks).

"Because of the high carrying costs as well the liability issues, you never tell an owner not to pay their payroll taxes," Cates says.

If you need a temporary reprieve, the IRS does allow payroll taxes to be paid on an installment basis, usually for a period of between one and two years. Keep in mind, though, that you're only buying yourself some time for the amount past due. You have to stay current with payroll taxes going forward. Signing an installment agreement also means putting up your company's assets as security.

"The IRS collection division is generally easy to work with," Cates says. But you'll be in much better shape if you take the initiative and ask for help: "If you know you're getting behind, you want to contact them before they contact you."

2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,106.63 -6.91 -0.04%
S&P 500 1,986.84 +3.31 0.17%
NASDAQ 4,472.3370 +16.3210 0.37%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs