Nebraska Payroll Tax Default Prevention Checklist

Nebraska Payroll Tax Default Prevention Checklist

Introduction

Nebraska income tax withholding is the state income tax that employers withhold from employees' wages and remit to the Nebraska Department of Revenue. Employers must accurately withhold these amounts, deposit them on required schedules, and report them through the proper forms.

When employers fail to withhold correctly, deposit on time, or report accurately, the state identifies this as a compliance failure that triggers enforcement procedures. Understanding how

Nebraska’s income tax withholding system operates helps you prevent defaults before penalties accumulate.

What This Issue Means

A payroll tax default occurs when an employer fails to withhold, deposit, or report Nebraska income tax withholding as required by law. The default can take several forms: taxes were not withheld from employee paychecks; amounts were withheld but not deposited by the deadline; deposits were made, but Form 941N was not filed; or reported amounts do not match actual deposits.

Why the State Enforces This Requirement

The state requires strict payroll tax compliance because withheld income tax belongs to

Nebraska, not to the employer. Employers function as collection agents who hold employee tax dollars in trust for the state.

Nebraska law requires employers to deposit withheld taxes by the 15th of the following month for monthly filers, or by the last day of the month following each filing period for quarterly and annual filers. Employers must file Form 941N returns according to their assigned filing frequency and ensure that deposits match reported withholdings on all submitted forms.

What Happens If You Ignore This Issue

Escalating collection actions begin when employers fail to promptly address withholding tax defaults with the Nebraska Department of Revenue.

Formal notices demanding payment arrive within specified timeframes, typically allowing 30 to

90 days depending on the tax type and circumstances.

What This Does Not Mean

Receiving a default notice does not mean criminal charges have been filed or that collection action has already occurred. Your business license remains valid, and asset seizure is not imminent simply because you received this notice.

Identifying a default does not mean the situation cannot be resolved through corrective action and communication with the department. Written notices arrive before the state pursues liens or levies, allowing you to respond and arrange payment.

Steps to Take After Identifying This Issue

1. Locate and review any notice you received from the Nebraska Department of Revenue.

Document the notice date, reference number, account number, affected tax periods, amount owed, and any stated deadline.

2. Gather all payroll records for the periods in question. Collect payroll registers, wage statements, bank records showing deposits, and all correspondence with the state.

3. Review your withholding tax deposits and Form 941N filings. Compare deposited amounts to reported amounts on each return and identify any discrepancies or missing periods.

4. Determine the specific cause of the default. Identify whether deposits were never made, made late, made in incorrect amounts, or whether Form 941N was not filed for particular periods.

5. Calculate the total amount owed by adding unpaid tax, assessed penalties, and accrued interest. Contact the Nebraska Department of Revenue for a current payoff amount if calculations are unclear.

6. Contact the department’s payroll tax section directly to report the issue and discuss available options. Prepare to explain the default and provide payroll records if requested during your call.

7. Request a payment plan if you cannot pay the full amount immediately. Ask about installment terms, including monthly payment amounts and the total repayment period.

8. Request written confirmation of any agreement reached by phone. Ask the department to send documentation outlining payment plan terms, extensions, or other arrangements discussed.

9. File any missing Form 941N returns immediately. Prepare and submit all required returns with accurate withholding information and supporting documentation for each period.

10. Make the first payment by the deadline stated in your notice. Submit payments on time and include your account or reference number with each payment.

11. Keep records of every payment you make to the department. Save receipts, confirmation numbers, and bank statements showing each payment date and amount.

12. Establish a system to prevent future defaults. Set calendar reminders for deposit dates and return due dates, or consider using a payroll service to ensure ongoing compliance.

What Happens After You Complete These Steps

All materials and payments you submit in response to the default notice undergo review by the

Nebraska Department of Revenue. Processing occurs according to statutory priorities, with payments applied to your delinquent account in the order required by law. You receive a receipt or confirmation of payment showing how the department used your funds. Written confirmation outlining the agreed terms and payment schedule is provided when you enter a payment plan with the department.

Common Mistakes to Avoid

• Not responding to notices within stated deadlines allows the department to proceed with

collection action without further warning.

• Paying only part of the owed amount without contacting the department first may result

in misapplied payments and delayed resolution.

• Failing to file missing Form 941N returns prevents the department from verifying

amounts owed and processing your account correctly.

• Ignoring follow-up requests for information or documentation slows resolution and may

trigger additional enforcement actions.

• Not keeping copies of payments or confirmations makes it difficult to resolve disputes

about payment amounts or applications.

• Continuing to miss deposit deadlines after identifying the default signals ongoing

non-compliance with the department.

Understanding Personal Liability

Corporate officers or employees who have a duty to collect, account for, or remit income tax withholding face personal liability when they willfully fail to cause the business to pay these taxes. Nebraska Revised Statutes provide that individuals with direct responsibility for tax payment may be held personally liable for unpaid amounts when there is willful failure.

Facing State Tax Enforcement Action?

If you’ve received a notice related to sales tax or payroll tax enforcement, and aren’t sure how to respond, our team can help you understand your options and next steps.