In recent news, the collapse of a major employment company in California due to nonpayment of unemployment taxes should open all employers’ eyes to the necessity to pay payroll taxes in a timely manner. The EDD, Franchise Tax Board, and IRS are not very forgiving agencies.
Most payroll taxes are due within 3 business days of a check/payroll date. Penalties for late payments accrue rapidly. The IRS charges 2% penalties for deposits made 1-5 days late, 5% for deposits made 6-15 days late, 10% for deposits made 16+ days late, and 15% on amounts still unpaid more than 10 days after the first notice the IRS sends asking for the tax due. EDD penalty rates are slightly more forgiving than the IRS, but still hefty http://www.edd.ca.gov/payroll_taxes/Interest_Rate.htm.
Furthermore the EDD, IRS and Franchise Tax Board all have the ability to levy assets as a result of unpaid employer taxes, penalties, and interest. As the case in the employment agency mentioned above, these levies can be so cumbersome that they can easily force the closure of a business.
Lesson to be learned…..don’t mess with payroll taxes! The monetary and even business operations penalties are too big.