Beware: IRS Will Pursue Unpaid Payroll Taxes…Years Later

If the Internal Revenue Service seems righteous in its collection of income taxes, I have news for you. The tax collection agency is even more aggressive in its collection of payroll taxes. Consider: The IRS statute of limitations is usually three years for an audit or to make an assessment. Sometimes the agency gives itself six years to come after you. But as a recent case shows, the agency can go back longer – as many as 30 years longer. And, that case is the failure to make payroll taxes.

Now, you may be thinking to yourself, I never sign the front of a paycheck. However, if you are what the IRS deems a “responsible person” at a company, a member of the board or an owner (even a partial owner), you have personal liability if the company does not pay payroll taxes. In fact, the IRS can institute criminal penalties or even shut the business down in extreme cases.

A word to the wise: 40% of small businesses use payroll services to process employee checks. If you do, keep a sharp eye on performance because payroll tax theft is a growing problem.