{"id":354030,"date":"2025-04-07T14:23:46","date_gmt":"2025-04-07T19:23:46","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/tax\/tax-problems-audits\/what-happens-if-a-small-business-has-unpaid-payroll-taxes.html"},"modified":"2026-02-17T11:28:06","modified_gmt":"2026-02-17T16:28:06","slug":"what-happens-if-a-small-business-has-unpaid-payroll-taxes","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/tax\/tax-problems-audits\/what-happens-if-a-small-business-has-unpaid-payroll-taxes.html","title":{"rendered":"Unpaid Payroll Taxes? How To Avoid Personal Liability and Settle Your Debt"},"content":{"rendered":"\n
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Unpaid Payroll Taxes? How To Avoid Personal Liability and Settle Your Debt<\/h1>\n\n
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\n By Christie Nicholson, J.D.<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last updated\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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Key Takeaways<\/h2>\n

Payroll taxes are state and federal taxes that business owners<\/span> must withhold from employee wages<\/span> and send to the government. Failure to pay these liabilities can lead to the Trust Fund Recovery Penalty<\/span>, which allows the IRS<\/span> to seize personal assets<\/span> or garnish<\/span> wages to settle the debt. Responsible parties can avoid liability by proving the error was not willful, negotiating an installment agreement<\/span>, or making an offer in compromise<\/span>.<\/p>\n\n <\/div>\n <\/div>\n<\/div>\n\n\n

Running a business is a challenging endeavor. Not only do you have to deal with the day-to-day management of your company, but you also have to handle issues like employment taxes<\/span><\/a>. Unpaid payroll taxes<\/span> can lead to severe consequences for small <\/span>business<\/span> owners<\/span>.<\/p>\n

If you owe back payroll taxes<\/span>, the government can pursue not only your business assets, but also your personal assets<\/span>. In addition, the IRS<\/span> will likely impose harsh penalties. These include the Trust Fund Recovery Penalty<\/span>, which holds business owners<\/span> personally liable for payroll <\/span>tax debt<\/span>.<\/p>\n

This guide explains what can happen if you owe payroll taxes, what legal steps you can take to protect yourself, and ways of resolving the debt. If you currently owe the IRS<\/span> money, consider contacting a tax attorney<\/span><\/a> or other legal professional. Things can get out of hand rather quickly, and it\u2019s better to face things head-on sooner rather than later.<\/p>\n

What Are Payroll Taxes?<\/h2>\n

If you\u2019re a small <\/span>business<\/span> owner<\/span>, you are responsible for all of your company\u2019s tax liabilities<\/span>, including payroll taxes. Your tax obligations<\/span> also include the following:<\/p>\n