The Importance of Incoming Tax

The importance of incoming tax withholding is so critical that if it’s done incorrectly, not only can the person go to jail, but it can have a major impact on their future finances because they can end up having to work for a very long time to pay the government what is owed. Businesses have a little higher risk than individuals.  A mistake on their part can ruin the employee’s bank account, and it can also bring the company to bankruptcy, which would have an immediate impact in their employees.  

Some of the penalties are listed in the book Bieg, B.J., & Toland, J.A. (2013), “the following penalties are imposed for late or incorrect filling of W-2s:

• If filed correctly within 30 days after the due date, $30 per return ($250,000 maximum penalty/$75,000 for small businesses).
• If filed between 30 days after the due date and August 1, $60 per return ($500,000 maximum penalty/$200,000 for small businesses).
• After August 1, $100 per return ($1,500,000 maximum penalty/$500,000 for small businesses).
• Penalties of $250 per return, or if greater, 10 percent of the amount to be reported correctly for intentional disregard of the requirements for filing, providing payee statements, and reporting incorrect information (no maximum penalty).
• Filing W-2s with mismatched names and social security numbers, $50 per form.
• Penalties of $100 per statement ($1,500,000 maximum) for failure to furnish the statements to employees on time, or furnishing incorrect information on the statements.”

It may seemed harsh or ridiculous to see all these penalties, but let’s keep in mind that the government is very strict and they don’t mess around with their money. There are rules that need to be followed and calculating the correct tax amount is one of them. Unfortunately, there are people that still avoid taxes because they think that the government is taking advantage of the money, but these individual forget that thanks to this money we have roads, public services, parks, police officers, and different government agencies that we utilize in everyday situations.