How do I record a state income tax lien?

Do I just record the interest and penalty, if any, in separate expense accounts, appropriately identified?

Answer

"I'm talking about income tax the business collects from employees to send to the state."

The employer steals from the employees, by taking their tax withholding deductions but not sending them on to the Feds and State.

"It is past due and the state put a lien on the business with penalty and interest Do I just record the penalty and interest expense appropriately notated and I'm done?"

Penalty and Interest are for Non-compliance with laws and regulations. That is Not Deductible as business expense, since it is proof of violation. You put both amounts into an Other Expense type of account and title it Nondeductible. There is no Business reason to steal from the staff. It is not going to meet the Ordinary And Necessary or Reasonable rules. Sorry.


And you know people get taken to court over this, right? The State and the IRS can press charges, and of course, so can the staff.


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