Employment Tax Crimes
All employers are required to withhold federal income and payroll taxes (“trust fund taxes”) from their employees’ wages, and to pay them over to the IRS and the State. If you fail to report and pay employment taxes, you can be subject to large penalties and imprisonment. If the IRS cannot secure the funds from your business, it will pursue you personally. It may go after anyone associated with the business, not just the owners and officers. For example, the IRS has found non-owner bookkeepers personally liable — and their spouses as well. The IRS has also held non-owner lenders and their spouses personally liable for unpaid payroll taxes.
If you are a business owner, shareholder, or investor under investigation for an employment tax crime, the Moskowitz, LLP criminal tax attorneys can provide you with an efficient and comprehensive defense. Here are just a few examples of employment tax evasion matters routinely handled by our office:
Paying employees in cash
A company pays part or all of its employee salaries in cash. There is often a problem with providing the proper deductions or sometimes the business owner commits other tax crimes by not reporting income given in cash to employees. Paying employees in cash can lead to multiple crimes and multiple problems with multiple taxing agencies.
Misclassifying employees
A company tries to reduce its costs by improperly classifying employees as independent contractors. In addition to payroll crimes and civil wrongs, this business may also have criminal and civil problems with unemployment taxes and criminal and civil allegations brought by the workers’ compensation agency. We are very experienced with representing and coordinating the criminal and civil investigations of multiple enforcement agencies.
Failing to file and/or pay
A company fails to file payroll tax returns and/or pay over trust fund taxes. The IRS goes after all responsible persons and also assesses a “trust fund” penalty equal to 100% of the total tax liability. We want to help! It is possible to design a defense that makes the individual responsible for only the “trust fund” portion (the money withheld from the employees) and not 100% of the payroll taxes.
Filing false payroll tax returns
Understating the amount of wages paid by the company in order to minimize the company’s tax bill. Again, this may cause multiple criminal and civil allegations from multiple enforcement agencies.
Pyramiding
When the company and/or individual[s] continue the criminal and civil wrongdoing. Every wrong act makes the allegations worse, and one of the factors considered in sentencing is the amount of loss to the government: the larger the loss to the government, the more prison time.
Leasing
An employee-leasing company hired to handle a business’ payroll fails to pay over the collected employment taxes and instead spends the funds. The company then dissolves, leaving millions in employment taxes unpaid.