Mississippi Payroll Tax Nonpayment Emergency
Checklist
Payroll tax nonpayment occurs when an employer fails to submit withheld employee income taxes to the Mississippi Department of Revenue by the required deadline. These taxes represent legally required payments that employers collect from employees or owe directly to the state, and when not paid on time, the state treats this as a serious compliance violation because the money withheld belongs to the government, not to the employer.
Ignoring payroll tax debt can result in escalating penalties, interest charges, liens against business assets, wage garnishment, and potential criminal referral. This issue typically emerges after the state’s initial notice phase and moves into active collection when the debt remains outstanding.
What This Issue Means
Payroll tax nonpayment means that an employer has not remitted state income tax withholding owed to Mississippi by the state-set deadline. State authorities may identify this through audit, bank deposit records, third-party reports, or when an employer fails to file required payroll tax returns, and once identified, the nonpayment becomes a documented debt recorded in the state’s tax collection system.
Mississippi Department of Revenue administers state withholding tax, while the Mississippi
Department of Employment Security administers unemployment insurance separately.
Understanding this distinction helps employers contact the correct agency for their specific tax issue.
Why the State Issued This or Requires This
Mississippi requires payroll tax deposits and filings because employers are required to act as tax collectors on behalf of the state government. When an employer withholds taxes from an employee’s paycheck, those funds are held in trust for the government and do not belong to the business.
The state enforces payroll tax compliance to protect employees, maintain state revenue, and ensure fair tax administration. Nonpayment is typically discovered through payroll tax return filings or when a quarterly payroll tax return is not received by the due date.
What Happens If This Is Ignored
Initial contact may include a notice or bill requesting payment, and if payment is not received, penalties and interest continue to accrue on the unpaid balance. Interest accrues at 1% per month from the time the tax was due until it is paid, the penalty is 10% on the amount of tax due, and for late payment specifically, the penalty is 0.5% per month up to a maximum of 25%.
The state may file a tax lien against the business’s assets, which becomes a public record and can damage credit and financing. Subsequent actions may include wage garnishment of business owners or seizure of bank accounts.
What This Does Not Mean
Receiving notice of payroll tax nonpayment does not automatically mean criminal charges are pending or that the business will be shut down immediately. The state has not necessarily filed a lien simply because nonpayment is identified, though it may do so if the debt is not resolved, and many businesses in this situation can work out payment arrangements without reaching enforcement extremes.
Checklist: What to Do After Identifying Payroll Tax
Nonpayment
Follow these steps in order. Completing all steps does not guarantee any specific outcome, but it establishes a clear record of action.
1. Gather all payroll tax records for the periods in question, including payroll journals, deposit receipts, canceled checks, bank statements, and any correspondence from the state.
2. Locate any notices received from the Mississippi Department of Revenue and write down the notice date, the amounts claimed, and any deadlines listed.
3. Contact the Mississippi Department of Revenue at (601) 923-7700 for general inquiries
or (601) 923-7088 for withholding tax-specific questions to request an account balance statement.
4. Calculate current financial capacity and determine whether the business can pay the full amount owed, make a partial payment, or needs to set up a payment arrangement.
5. Review payroll records to verify whether taxes were actually withheld and deposited, as some nonpayment situations arise from recordkeeping errors or misapplied payments.
6. Document the date, time, and name of the person you speak with when contacting the
Mississippi Department of Revenue about your account status.
7. Ask about Mississippi withholding tax payment plan options if the business cannot pay in full. For tax liabilities between $75 and $3,000, you may qualify for a 12-month payment plan if the return was filed on or before the due date, you filed all required returns and paid all taxes for the past five years, and you had no installment agreement in the past five years.
Amounts over $3,000 require an approved installment agreement with the Internal
Revenue Service for the same tax year, allowing payment within 60 months, and interest of 0.5% per month continues during the agreement period.
8. File any outstanding payroll tax returns by contacting the Mississippi Department of
Revenue to obtain required forms or by accessing the Taxpayer Access Point online filing system.
9. Submit payment or Form 71-661 payment plan application in writing with your employer identification number clearly marked on all documents.
10. Request written confirmation of receipt and account status after submitting any payment or application.
11. Maintain a file of all notices, payment records, receipts, and agreements received from the state.
12. Track all payments carefully with records of dates, amounts, and confirmation numbers if a payment plan is approved.
Common Mistakes to Avoid
- Missing deadlines on payment plan agreements can result in acceleration of the debt
and resumed collection efforts.
- Failing to respond to follow-up notices often leads to escalation and further enforcement
action.
- Sending payment without clear documentation may cause payments to be credited
incorrectly to your account.
- Attempting to make informal payment arrangements is risky because verbal agreements
are not binding under state procedures.
- Filing new returns without addressing old debt does not clear the previous outstanding
balance.
Frequently Asked Questions
Does payroll tax nonpayment automatically result in a lien?
Not immediately. The state may file a tax lien if the debt is not resolved, but this does not happen automatically upon identification of nonpayment.
If we set up a payment plan, will penalties and interest stop accruing?
No, interest continues to accrue at 0.5% per month on unpaid tax balances even during a payment plan arrangement.
If we pay the tax portion but not penalties and interest, does that settle the account?
No, the account balance includes principal, penalties, and interest, and all three components are required to resolve the debt.
If the business closes, does the payroll tax debt go away?
Payroll tax debt follows the business entity and may attach to the owner personally under certain circumstances. Closing the business without resolving the debt does not eliminate the obligation.
What are the Mississippi Department of Revenue payroll penalties for late payment?
Mississippi imposes a penalty of 10% on the amount of tax due, and for late payment specifically, a penalty of 0.5% per month up to a maximum of 25%. Interest accrues at 1% per month from the time the tax was due until it is paid.
Facing State Enforcement or Payroll Tax Issues?
If you’ve received a state tax notice and aren’t sure how to respond, we can help you review your options and next steps.
We help with
- State enforcement actions and notices
- Payroll tax debt review and resolution
- Penalty and interest reduction options
- Payment plans and compliance solutions
- Representation before state tax agencies
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