What are the consequences of underpaying or failing to pay payroll taxes?

Underpaying or failing to pay payroll taxes can have severe consequences for employers. The IRS and state agencies can assess penalties and interest charges for late or underpaid payroll taxes. The penalties can be substantial, such as the Trust Fund Recovery Penalty (26 U.S.C. §6672) for willfully failing to collect or pay employment taxes. This penalty can be assessed against responsible individuals, including corporate officers, and requires them to pay the unpaid payroll taxes out of their personal assets. Additionally, the IRS and state agencies can file tax liens against the employer’s property, levy bank accounts, and potentially pursue criminal charges for willful evasion of payroll taxes (26 U.S.C. §7202).