Business ventures can thrive in the land of promise (USA) reasonably well provided they do not default on their obligation of tax towards the federal government. The business that employs people is responsible not only towards what they pay for their employees, in addition, they have to take responsibility for the society for its social welfare schemes, the healthcare of the elderly in the society and also the medical facilities for their own employees. By means of tax reduction at the source of the pay of the employees, the employers withhold a certain percentage in the pay-roll amount. This income is taxable and there are cases where proper reporting has not been there. To avoid having to face hassles in the form of the IRS (internal revenue service), stringent measures and punishment; employers are required to comply with the payroll taxes.
Some employers instead of remitting the payroll taxes use that amount for funding their companies’ requirements or for rotation of funds as quick-fix measures to address the shortage of cash. This may be due to the high rent and business not up to the expectations. This willful noncompliance, in the long run, leads to heavy damage for non-disclosure and willful abetment of tax law. Criminal proceedings may also be instigated for such offenses.
It is mandatory for employers to withhold a certain amount from the employees and submit the details to the IRS and based on this the pay-roll taxes are computed. They are obliged to submit the details of their employees and their pay-roll periodically. Employers are required to file the reports of the payroll on a quarterly basis in the states and annually to the federal government. Failure to remit the payroll tax will invite a penalty or 2 -10%. The IRS is a long-handed arm of the government that can punish both the employee and employer when they discover the default in payroll taxes.
Just as the FBAR is the long-handed arm to check the proliferation of unaccounted money in foreign banks similarly the IRS is the arm working with the country.
Any business whether small or big should work in tandem with the government authorities to iron out their differences and if in case of appeal they can always take it to the office of appeal for reversal. The ways in which tax evasion can happen are
- Omission and understatement of income
- Improper deduction and fictitious deductions
- False information of employees
- Improper allocation of income
Any responsible business venture should approach a tax consultant and see to it that their business does not undergo stress with tax evasions and non-reporting. Know all the details of tax law! Become the master of your own business with the right input of running the business, with the proper input of managing the business- coupled with proper reporting to the tax authorities and be a good employer who inspires the employees to remain steadfast and innovate in their field.