This week we discussed forms required of employers for FICA and federal income t

Question

This week we discussed forms required of employers for FICA and federal income taxes withheld. In this week's class discussion you will converse with your classmates on questions dealing with whether forms and deposits were made in a timely manner.

Please respond to all of the following prompts:

1. Questions for Discussion: In order to improve the cash flow of the company, Neal Emerald decided to postpone depositing all employment taxes a few months ago. He told his sales manager, "I'll pay up before the IRS catches up with me."

What risks does Emerald face by not upholding his responsibility for the collection and payment of employment taxes?

Explanation / Answer

Yes, when a company faces a severe crunch in the cash flow the management will only look into generating cash flows and in stabilizing the condition of the company, since if the cash condition gets severe then the condition may even lead to shut down of the company. What Emerald did was correct from his point of view but the way he communicated it to his sales manager is where he went wrong.

The strategy that he followed is right but he should understand that not all employees will be ready to face the risks involved in the business that he owns. Emerald knows the condition of the company and the severity of the cash flow requirement but his sales manager necessarily need not know this.

From sales manager point of view the following will be the risks that Emerald might face for not upholding his responsibility for the collection and payment of employment taxes:

a. According to Emerald he did not stop collecting the tax but rather he has upheld the payment of taxes to the government temporarily. This might convey a wrong opinion about the company that Neil is collecting all the tax and not paying it the government. This may convey a wrong opinion about the employer in the minds of employees.

b. He might be levied with high penalties if the payment is not done on time.

c. If the employee comes to knows about this then they may file a case against the employer for not paying their tax to the government.

d. Neil might be forced to face legal consequences from the government.

e. Attrition rate might increase in his company / organization.

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