Louisiana Payroll Tax Enforcement & Liens Checklist
Payroll tax liability occurs when employers withhold state income taxes from employee wages but fail to deposit these funds with the Louisiana Department of Revenue on schedule. Withheld payroll taxes are considered trust fund taxes held in trust for remittance to tax authorities. When payroll taxes remain unpaid, the state may issue notices, assess penalties and interest, and eventually file a tax lien against your business or personal assets.
Understanding what payroll tax enforcement means and how the state processes these cases helps clarify your options and responsibilities. Ignoring payroll tax notices typically results in escalated collection actions, increased tax debt through penalties and interest, and potential legal enforcement against your business or personal property. This checklist explains what Louisiana payroll tax enforcement is, what typically happens next, and what steps to take if you are facing this issue.
What This Issue Means
Payroll tax enforcement refers to the collection process the state initiates when an employer has failed to remit withheld state income taxes to the Louisiana Department of
Revenue. State withholding taxes include the Louisiana income tax that employers are required to deduct from employee paychecks and deposit on a set schedule. When these deposits are missed or incomplete, the employer becomes liable for the full amount owed, plus penalties and interest that accrue over time.
A notice of lien, or tax lien, is a legal claim the state files to secure payment of the debt, giving the state priority over other creditors if the business or owner's assets are sold.
The lien becomes a public record once filed with the clerk of court. It may attach to business assets, real estate, or other property owned by the responsible party.
It is important to note that the Louisiana state withholding tax is separate from federal
payroll taxes. Social Security and Medicare taxes (collectively known as FICA taxes)
are federal obligations deposited with the Internal Revenue Service at rates of 6.2% and
1.45% respectively. These federal taxes are never deposited in Louisiana. This checklist addresses only the Louisiana state withholding tax enforcement.
Why the State Issued This or Requires This
The Louisiana Department of Revenue enforces payroll tax collection to ensure businesses comply with tax deposit requirements. Employers are required to deposit withheld state income taxes on a schedule that depends on the monthly withholding amount: quarterly if withholding is less than $500 per month, monthly if withholding is
$500 to $4,999 per month, and semimonthly via electronic payment if withholding is
$5,000 or more per month. Common administrative triggers for enforcement include missed deposits, incomplete payments, failure to file quarterly withholding returns (Form
L-1), or nonresponse to previous state notices.
The state typically issues delinquency notices before filing a lien, allowing employers to address the debt. If an employer does not respond to or resolve the unpaid taxes, the state may file a lien as a formal collection tool. The Louisiana government takes these obligations seriously because withheld taxes represent funds held in trust for remittance to tax authorities.
What Happens If This Is Ignored
If payroll tax enforcement notices are ignored, the state typically escalates collection efforts. This may include additional lien notices, increased penalties and interest charges, and the filing of a tax lien against business assets or the owner's personal assets. A lien becomes a public record and may affect the business's ability to secure loans, refinance debt, or transfer real estate or other property.
In cases of severe or repeated noncompliance, the state may pursue criminal penalties or refer the case to the Attorney General's office for further legal action. Additional collection actions may include bank levy procedures or other enforcement mechanisms.
The longer the debt remains unpaid, the larger it becomes due to accruing interest and penalties.
Louisiana has a three-year statute of limitations for assessing taxes, beginning on
December 31 of the year the taxes were due. However, once evaluated, the state has a ten-year statute of limitations for collection under Revised Statutes 47. This means the state can pursue collection of assessed payroll tax debt for up to ten years from the assessment date.
What This Does NOT Mean
Receiving a payroll tax enforcement notice or lien does not mean the business has been closed or seized. It does not automatically result in criminal charges, though willful noncompliance or fraud may lead to criminal investigation. A lien does not give the state immediate authority to seize assets or garnish bank accounts, though the state may pursue other collection tools such as wage garnishment or asset seizures if the debt remains unpaid.
The presence of a lien does not mean the taxpayer has no options to address the debt or arrange a payment plan. Tax relief options may be available depending on your specific circumstances. Additionally, a Louisiana state tax lien does not appear on personal credit reports.
Since April 2018, all three major credit bureaus (Equifax, Experian, and TransUnion)
have stopped including tax liens on consumer credit reports. While a lien is still a public record that may appear in property searches or background checks, it does not directly affect your credit score. This differs from a federal tax lien issued by the IRS, though federal liens no longer appear on credit reports.
Checklist: What to Do After Receiving This or Identifying
This Issue
Follow these steps if you have received a Louisiana payroll tax enforcement notice, lien
notice, or suspect unpaid payroll tax liability
1. Locate and review all payroll tax notices from the Louisiana
Department of Revenue.
Gather all notices, letters, and lien documents you have received. Check your email, your mail, and any records kept at your place of business. Note the dates, amounts, and specific tax periods referenced in each document.
2. Identify the specific tax periods and amounts owed.
Review your payroll records to confirm which state withholding tax deposits were missed or are incomplete. Determine the tax periods in question (month, quarter, or
year). Calculate the amount of withheld Louisiana income taxes that were not deposited.
3. Contact the Louisiana Department of Revenue to verify the balance owed.
Call the Department to confirm the total amount of state withholding tax debt, including any accrued penalties and interest. Request written confirmation of the balance and any deadlines associated with the debt. Ask whether a lien has been filed and what steps are required to address it.
4. Gather documentation of all payroll and tax payments made.
Collect payroll records, bank statements showing deposits to the Louisiana Department of Revenue, and any receipts or confirmation numbers for tax payments. Organize these documents chronologically by tax period. This information will help verify what has been paid and what remains outstanding.
5. Review the lien notice for specific filing information and procedures.
If a lien has been filed, the notice will include details about where the lien was recorded, the recording date, and the amount secured by the lien. Note whether the lien applies to business assets only or personal assets as well. Determine whether the state has provided an address or process for addressing or releasing the lien.
6. Determine whether the business is still operating and currently filing payroll taxes.
If the business is still operating, confirm that all current state withholding tax deposits are being made on time according to your required frequency (quarterly, monthly, or semimonthly). If deposits were not made for a period when the business was operating, identify why deposits were missed.
7. Document any payments or partial payments made toward the payroll tax debt.
Collect evidence of any payments applied to state withholding taxes after the initial debt was incurred. This may include bank statements, cancelled checks, payment receipts, or correspondence confirming payments. These documents help verify the current balance owed.
8. Obtain your business's federal Employer Identification Number and
Louisiana tax identification numbers.
Have these numbers ready for correspondence and phone calls with the Department of
Revenue. Ensure all documents are labeled with the correct identification numbers to avoid confusion or misfiling.
9. Request a written statement of account from the Louisiana Department of Revenue.
Contact the Department and request a detailed accounting of the state withholding tax debt, showing the original amount owed, penalties and interest, and any payments applied. This official statement will provide clarity on the exact amount currently due.
10. Determine whether federal payroll tax obligations also exist.
If state income taxes were withheld but not deposited to Louisiana, determine whether federal obligations (federal income tax withholding on Form 941, Social Security, and
Medicare) were also not deposited to the Internal Revenue Service. Contact the IRS or check the official website to determine whether federal payroll tax penalties exist. State and federal governments may work together on collection.
11. Contact a payroll tax professional, Certified Public Accountant, or tax attorney for guidance on next steps.
Many taxpayers benefit from professional guidance when addressing payroll tax enforcement. A tax accountant can help explain your options, review the accuracy of the debt calculation, and communicate with the state on your behalf. Professional assistance often helps navigate complex tax issues more efficiently.
12. Do not ignore follow-up notices or communication from the Department of Revenue.
Respond to all state notices within the specified timeframe. Ignoring notices typically worsens the situation and may result in further enforcement action.
What Happens After This Is Completed
After you have gathered information and contacted the Louisiana Department of
Revenue, the state will review your account and may provide additional guidance or next steps. The state may offer an Installment Agreement for payment arrangements, request a lump sum payment, or work with you to resolve the debt through available tax
relief options. If a lien has been filed, the state will explain the process for releasing the lien once the debt is paid or settled.
To request information about lien payoff amount or lien release procedures, you may need to complete Form R-19023 and submit it to the Department. Processing times vary depending on the complexity of your account and the state's current workload. The collection process continues until the debt is resolved or the statute of limitations expires.
Common Mistakes to Avoid
- Ignoring notices: Failing to respond to state notices or enforcement actions
typically results in escalated collection efforts, additional penalties and interest, and possible legal proceedings.
- Failing to confirm the balance owed: Not verifying the exact amount of tax debt
with the state may result in incomplete or incorrect payments that do not resolve the issue.
- Continuing to miss payroll tax deposits: If the business is still operating, ongoing
failure to deposit current state withholding taxes will increase the total debt and may trigger additional enforcement.
- Not providing documentation to support payments: If you have made payments
toward the debt, failing to provide proof may result in the state not crediting these amounts to your account.
- Assuming the problem will resolve on its own: Payroll tax debt does not
disappear. It typically increases through accruing interest and penalties until addressed through proper tax resolution.
- Mixing state and federal obligations: State withholding taxes are owed to the
state of Louisiana. Federal taxes (federal income tax withholding on Form 941,
Social Security, and Medicare) are owed to the Internal Revenue Service.
Addressing one without the other leaves a separate debt outstanding.
- Not seeking professional assistance: Many payroll tax cases involve complex
calculations and multiple tax periods. Professional guidance from a tax accountant or Certified Public Accountant often helps clarify options and resolve issues more efficiently.
Frequently Asked Questions
What is the difference between a payroll tax notice and a tax lien?
A notice is a bill or demand for payment issued by the state. A tax lien is a legal claim filed in public records to secure the debt. A notice typically precedes a lien, and a lien may be filed if the debt remains unresolved.
How long does a tax lien remain on record?
A lien typically remains until the debt is paid, settled, or the statute of limitations expires.
Louisiana has a ten-year statute of limitations for collection from the date of assessment. Contact the Department of Revenue for details about your lien and lien release procedures.
Can I release a tax lien before paying the full amount owed?
The Louisiana Department of Revenue may release or subordinate a lien in certain circumstances, such as if you have entered into an Installment Agreement or payment
plan. You may need to complete Form R-19023 to request information on the lien payoff amount. Contact the Department to discuss your specific situation.
Will a payroll tax lien affect my personal credit score?
No. Since April 2018, tax liens no longer appear on credit reports issued by the three major credit bureaus. However, a lien is still a public record that may appear on background checks and property searches and may affect your ability to secure loans or financing.
Can I file bankruptcy to eliminate payroll tax debt?
No. Payroll taxes and trust fund taxes (withheld taxes) are not dischargeable in any type of bankruptcy proceeding, including Chapter 7 or Chapter 13. This is a complex legal question that requires consultation with a bankruptcy attorney.
What is the difference between state and federal payroll tax obligations?
Louisiana state withholding taxes are deposited with the Louisiana Department of
Revenue. Federal taxes, including federal income tax withholding, Social Security, and
Medicare, are reported on Form 941 and deposited with the Internal Revenue Service.
Both are owed even if only one has been reported or enforced.
If I sell my business, will the buyer be responsible for the payroll tax lien?
A tax lien typically attaches to business assets, including real estate, and may affect the sale of those assets. The state may claim a portion of the sale proceeds to satisfy the lien. Consult a tax attorney or business advisor about the impact on a potential sale.
Is information about my payroll tax case confidential?
Tax information is generally protected by state law, but a filed tax lien becomes a public record. The lien itself is available for public inspection, though details of your account remain confidential when you connect to the official website or transmit information securely.
Facing State Tax Enforcement Action?
If you’ve received a notice related to sales tax or payroll tax enforcement and are unsure how to respond, our team can help you understand your options and next steps.
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- State enforcement notices and responses
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- Payroll & trust fund tax enforcement issues
- Penalty and interest reduction options
- Payment plans and state tax relief eligibility
- Representation before state tax agencies
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