Borrowing From Employee’s Withholding Taxes-A Big Mistake!

August 2nd, 2014 at 11:17 AM

Borrowing payroll tax withholding funds is stealing. Why? It’s not yours. When you or your corporation withhold money from the employees, you individually act in a fiduciary capacity and have the responsibility to remit that money to the government timely.

Your willful failure to accomplish this, triggers a penalty equal to the total tax not paid. That’s a 100% penalty! And there is interest due as well on all late payments to the IRS.

Let’s say you unknowingly borrow the payroll taxes, and have not remitted to the IRS. You now face the bounty hunter from the IRS. Once the IRS assesses the responsible party penalties, you have them for life; you are not able to discharge them in bankruptcy. The IRS has a solid history of identifying you, the business owner, as a responsible party and making you pay the taxes and penalties. The IRS does not care how long the collection process takes, even if it takes the rest of your life to pay it off.

I recommend that my clients use a reliable payroll service to avoid these potentially fatal problems. Have the payroll service debit the funds directly from your bank and send it to the IRS. This way you do not even see the payroll tax money or have access to it.

In addition, the IRS knows when you miss the due date for the taxes, and that’s the date the 100% penalty begins.


  1. Remit the payroll taxes to the government on time, every time
  2. Never borrow the payroll withholding funds
  3. Use a reliable payroll service to process the payments to the IRS
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