Employment Taxes: Make Sure You’re in Compliance

A failure to pay employment taxes can have serious consequences, not only for the business that does not pay, but also for individuals like accountants, bookkeepers, and corporate executives who have a responsibility for making sure payroll taxes are paid on time.

There are options for authorities to pursue both civil and criminal penalties, and the consequences can range from jail time to fines to an injunction preventing the payment of other creditors, the transfer of property or the formation of a new business.

If you need help understanding your employment tax obligations, or if you are concerned that you could face penalties for failure to comply with the rules for withholding, reporting, and paying employment tax, you need to speak with a Boston business tax attorney. It is especially important to get legal help if you are facing criminal charges or a civil action.

Unfortunately, more people and businesses are likely to find themselves in this difficult situation as the IRS and Department of Justice have announced they are joining together to crack down more heavily on noncompliance with employment tax laws.

DOJ and IRS Cracking Down on Failure to Pay Employment Taxes

Employers must withhold an appropriate amount of money from the paychecks of their employees because employees are required to pay federal income tax and FICA taxes as income is earned.

Employers keep the money that their workers owe the federal government, make reports about the employment taxes they are withholding, and pay both the employment taxes withheld from workers' paychecks, as well as the portion of FICA taxes for which the employer is responsible.

When an employer fails to collect, report, or pay employment taxes, the consequences can extend to the business as well as to the individuals responsible for tax collection.  An individual who doesn't do his or her job in making sure the company pays taxes could be held personally liable in a civil case for the money which is owed to the IRS. 

Behavior can also rise to the level of criminal if a company uses payroll tax funds to pay other creditors; files false tax returns; pays personal expenses with payroll tax funds; or pays employees cash under the table in order to avoid employment tax obligations.

The IRS and Department of Justice are working together to bring more civil and criminal cases, in large part because the IRS is losing so much money due to noncompliance with employment tax requirements.  Unpaid and underreported employment taxes account for $72 billion of the tax gap within the U.S., and up to $59 billion in taxes that have been reported on employment tax returns has not been paid.

Kevin Thorn can provide assistance as the Department of Justice and IRS increase their efforts to enforce employment tax laws. Call today to speak with him and find out how to comply with tax laws and explore your options if you fear you could be caught in a crackdown for failure to follow IRS rules.

For a consultation, contact Kevin E. Thorn, Managing Partner, at ket@thornlawgroup.com or (617) 692-2989