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Employment Tax Reporting

Maryland Tax Lawyer Discusses Employment Tax Reporting Rules

Employers have a strict obligation to provide detailed employment tax information to the federal government.  Under IRS rules, employers must report the workers that they employ, all wages, tips and other compensation they pay to their employees, and the amount of employment taxes they have withheld from their employees’ compensation.   In the federal tax system, employers are required to withhold and remit employment taxes from their employees’ paychecks to the IRS, including federal income tax and Social Security and Medicare taxes.  

The IRS requires employers to report the income and amount of taxes that they withhold from their employees on Form 941 (Employer’s Quarterly Federal Tax Return).  Employers must deposit the withheld income taxes and Social Security and Medicare taxes in an authorized bank or financial institution according to Federal Tax Deposit Requirements.  Additionally, employers must submit a Federal Unemployment (FUTA) tax return and pay FUTA taxes to the IRS.  

IRS Penalties

When an employer does not satisfy government reporting requirements, fails to make the required deposits on time, or makes a deposit that is less than the required amount, the employer may face substantial IRS penalties.  For instance, if an employer fails to file a return by the required due date, the IRS can assess a penalty at the rate of 5 percent per month on the amount of the unpaid tax, up to a maximum of 25 percent.  If the IRS determines that the employer’s failure to file was fraudulent, the penalty can be increased to 15 percent per month up to a maximum of 75 percent.

The IRS penalties for failing to make a timely withhold deposit can range from 2 percent on deposits which are 1 to 5 days late, up to 10 percent on deposits which are late by 16 days or more.  Additionally, the IRS can impose a 15 percent penalty on deposit amounts that are still unpaid more than 10 days after employer has received a notice and demand for immediate payment from the IRS.

In addition to the penalties associated with failing to meet government tax reporting and withholding obligations, employers can be subject to an IRS audit, particularly where the employer may have improperly misclassified its workers as independent contractors rather than employees.

Thorn Law Group Can Help Protect Your Business

If you have concerns about employment tax withholds and your reporting obligations, Thorn Law Group can help.  We are a skilled tax law firm that represents small and mid-sized companies, business owners, partnerships and other entities in Maryland, throughout the U.S. and around the world in a full range of employment tax matters.   Many of our lawyers have worked as IRS tax attorneys before entering private practice and we are very familiar with how the IRS examines and investigates employment tax disputes.   

To schedule a confidential consultation with an experienced tax law attorney in our Maryland offices, call 240-235-5096 or email Kevin E. Thorn, Managing Partner of Thorn Law Group at ket@thornlawgroup.com.


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