If you’re a business owner who has employees, knowing what 941 taxes are and when to file Form 941 is crucial to the success of your company. Form 941 is how employers report and remit to the IRS the amount of taxes that were withheld from their employees’ wages. Examples of these withheld taxes include federal income, Social Security and Medicare taxes. Generally, businesses are required to file their Form 941s quarterly, with deadlines of April 30, July 31, October 31 and January 31 of each year.
Failing to file 941s in a timely manner can also lead to hefty penalties and consequences, not only on your business, but at times, on you personally. Examples of such include:
If your payment is between 1-5 dates late, the IRS charges a penalty of 2% of the unpaid tax. Payments received 6-15 days late, are charged a 5% penalty. If you pay between 16-25 days late, the IRS imposes a 10% penalty. Any amounts that are more than 26 days late are subject to a 15% penalty. In addition to penalties, unpaid balances will also be charged interest.
In the event you fail to pay after you’ve received multiple notices of your tax liability, the IRS can impose a lien on all of your company’s assets, including property. They also have the ability to levy your bank accounts and accounts receivable. In the event that a tax lien is filed, TCI will require you to take action to continue providing cash flow. You may be required to either pay the lien balance in full and obtain a lien release or obtain a subordination agreement from the IRS.
In some instances, the IRS can impose the Trust Fund Recovery Penalty in the event that an officer of the company willfully fails to file taxes. The IRS is able to pierce through the corporate veil to hold these officers personally liable for penalties equal up to the full amount due, plus interest. In the event that the IRS decides that failure to file taxes is considered tax evasion, officers may face criminal penalties that include hefty fines and prison time.
The easiest way to avoid these potential pitfalls is by simply filing and paying all of your taxes on time. If you are unsure of your tax responsibilities, it is always best to consult with a tax professional to discuss your individual situation.
Author: Lydia H.