With this in mind, the IRS reserves some of its harshest penalties for businesses who are late in paying their payroll tax, or who fail to pay them at all. In fact, so harsh are the penalties that the IRS once dubbed the fine the "100 Percent Penalty." (The fine's name has recently been changed to "Trust Fund Recovery Penalty" as part of the IRS's attempt to sound more customer-friendly, but only the name has changed, not the fine.) As the fine's old name implies, if you fail to pay your IRS payroll tax, you may be fined up to 100 percent of the taxes due. So if you fail to pay $100,000 in payroll taxes, you could end up owing a total of $200,000 after penalties are assessed.

The IRS is far from passive on collecting payroll tax. Even if your business is operating by a shoestring budget, the IRS will not hesitate to seize your remaining assets or bank accounts. In fact, the IRS has the authority to shut down your business in an effort to collect, and it isn't afraid to use that authority.

Making matters even more serious, filing your business as a corporation or limited partnership will not shield you from the IRS holding you personally responsible for paying past due payroll tax. For instance, if you were president of a company that owed payroll taxes and went out of business, the IRS can (and most likely will) come directly to you to pay the bill, even if your business declared bankruptcy.

Further, the IRS casts a wide net in an effort to find "responsible people" who it can collect payroll taxes from. For example, if a failed business still owes taxes when it closes, the IRS can go after the president, the company's officers, the CFO, anyone with the authority to sign a check, the person responsible for paying the taxes or anyone else the IRS classifies as a "responsible person." In some cases, the IRS has even found bookkeepers earning $100 a week to be "responsible parties" and wound up charging them large amounts of money in payroll taxes and penalties.

One of the reasons the IRS casts a wide net in determining responsible parties is so they can go after the party who is the easiest to collect from. Keep this in mind if the IRS ever wants to interview you regarding delinquent payroll tax issues. Remember, the IRS is probably looking for ways to include you on its list of "responsible parties," not to exclude you.

The best advice most tax professionals can offer regarding payroll taxes is to not to get behind in paying the IRS in the first place.

However, if it is already too late for you to heed that advice, you should almost certainly consult with a qualified tax pro if the IRS ever questions you about payroll tax issues.