Nebraska Payroll Tax Nonpayment Emergency Checklist

Nebraska Payroll Tax Nonpayment Emergency

Checklist

Introduction

Income tax withholding nonpayment occurs when an employer fails to deposit withheld

Nebraska state income taxes to the Nebraska Department of Revenue by their required due dates. This situation is distinct from not filing a return, as nonpayment involves money that has already been deducted from employees’ paychecks but not remitted to the state.

The Nebraska Department of Revenue takes income tax withholding debt seriously because these funds are held in trust under the Nebraska Revenue Act. Ignoring this tax liability typically results in escalating collection actions, including notices, penalties, and potential enforcement through state tax liens or wage garnishment.

What This Issue Means

Income tax withholding nonpayment means that Nebraska state income taxes deducted from employee paychecks have not been deposited with the Nebraska Department of Revenue by their due dates. The Nebraska Department of Revenue typically discovers nonpayment when it compares employer filing records to deposit records and identifies a gap or shortage in the reported tax liability.

Why the State Issued This or Requires This

By regularly matching quarterly or annual payroll tax filings with actual deposit transactions, the

Nebraska Department of Revenue identifies nonpayment of income tax withholding. Employers must deposit withheld taxes on a schedule determined by payroll volume, and common triggers for nonpayment include cash flow problems, accounting errors, payroll processing mistakes, or deliberate nonpayment.

When deposits fall short or are missed entirely, the department generates a notice and begins collection proceedings. Enforcement of payroll tax collection protects employee withholdings and maintains the state's tax base under the percentage method or other calculation standards outlined in Nebraska Circular EN.

What Happens If This Is Ignored

If nonpayment of income tax withholding is not addressed, the Nebraska Department of

Revenue typically follows an escalating collection process. The state sends multiple notices requesting payment within specified timeframes, and if payment is not made, the department may assess penalties and interest on the unpaid tax liability.

What This Does NOT Mean

Receiving an income tax withholding nonpayment notice does not mean criminal charges have been filed against the business owner or that the business has automatically lost its licenses. It does not mean the state has already levied bank accounts or placed state tax liens on property, as those actions typically occur after additional notices and opportunities to respond.

Nonpayment notices alone do not result in immediate wage garnishment or asset seizure. The notice is a formal demand for payment and an opportunity to address the debt through communication with the state.

Checklist: What to Do After Receiving an Income Tax

Withholding Nonpayment Notice

1. Locate and review the notice carefully. Write down the tax period covered, the amount owed, the date the notice was issued, and any stated deadline for response or payment.

2. Gather all payroll records for the period in question. Collect payroll registers, Form 941N filings, deposit receipts, and bank statements that show what was withheld and what was deposited.

3. Verify what was actually withheld from employee paychecks. Review payroll processing records or accounting software to confirm the amount of Nebraska state income taxes deducted during the period cited in the notice, ensuring calculations follow the percentage method guidelines in Nebraska Circular EN.

4. Verify what deposits were actually made. Check bank statements, deposit confirmations, and payment records to identify what amounts were sent to the Nebraska Department of

Revenue and when they arrived.

5. Calculate the difference between what was withheld and what was deposited. Determine whether the shortage represents a full quarter's worth of payments or a partial amount, and verify whether minimum withholding requirements were met in accordance with the

W-4N form on file.

6. Look for accounting or filing errors that may explain the gap. Review whether there were mistakes in payroll processing, incorrect accounting entries, or duplicate filings that might account for the discrepancy in the reported tax liability.

7. Contact the Nebraska Department of Revenue. Call the department’s tax compliance or collection division to confirm that the notice is accurate and to ask about available payment options or arrangements.

8. Respond to the notice by the deadline stated. If a deadline is listed on the notice, prepare a written response before that date, even if you cannot pay in full immediately.

9. If you cannot pay in full, ask about payment plan options. The state may offer installment arrangements or other alternatives, so request information in writing and follow up to confirm any agreement made to resolve the outstanding tax liability.

10. Keep records of all communication with the department. Document dates, names of staff members, telephone conversations, emails, and any payment arrangements discussed or agreed to.

11. Make any agreed-upon payment on time. If a payment plan is established, treat those payments as critical obligations to avoid additional collection action.

12. If the notice appears incorrect, gather evidence to dispute it. Prepare documentation showing deposits made, withholding records, and calculations to support your position.

13. Submit any dispute or correction request in writing to the department. Include copies of supporting documents and provide a clear explanation of why the notice is inaccurate.

14. Follow up if no response is received within a reasonable timeframe. Contact the department again to confirm receipt of your submission and request the next step in the process.

What Happens After This Is Completed

After responding to an income tax withholding nonpayment notice, the Nebraska Department of

Revenue will typically review your submission and contact you with the next steps. If a payment arrangement was agreed to, the state will expect payments according to the established schedule. If you submitted a dispute, the department will investigate your claims using the percentage method standards or other guidelines in Nebraska Circular EN and issue a determination.

The department will continue collection efforts if the debt remains unresolved or if payment arrangements are not maintained. Communication with the state remains essential throughout the resolution process.

Common Mistakes to Avoid

• Failing to respond to the notice or to respond by the deadline typically results in

escalated collection action without further warning.

• Paying taxes for new payroll periods while old debt remains unpaid may delay resolution

and allow penalties to accumulate further on the original tax liability.

• Assuming the notice is automatically wrong without verification can lead to missed

opportunities for resolution, primarily when percentage method calculations from

Nebraska Circular EN support the state's determination.

• Making partial payments without confirming to which tax periods they will be applied can

create confusion about which tax periods remain unpaid.

• Failing to keep copies of deposit confirmations or payment receipts makes it challenging

to dispute claimed amounts later.

• Not following up after submitting a response or dispute may result in missed

communications from the state.

• Entering a payment agreement and then missing payments can result in the plan being

canceled and collection action resuming.

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.