Academic journal article Journal of Accountancy

Helping Clients Avoid Employment Tax Criminal Penalties

Academic journal article Journal of Accountancy

Helping Clients Avoid Employment Tax Criminal Penalties

Article excerpt

Many practitioners who counsel business clients, both small and large, are familiar with the difficult challenges that quickly arise when taxes are withheld from employee wages but not turned over to the federal government. On occasion, these taxes are not paid over due to the misdeeds of an in-house bookkeeper or a third-party payroll service responsible for ensuring that a business meets its tax obligations. More often than not, however, employers, acting without bad intentions, use the withheld money to satisfy pressing trade obligations or to meet payroll, debts the nonpayment of which is likely to lead to the shutdown of the business and loss of employee jobs. Unfortunately, this strategy can prove extremely costly to both the business and its principals, generating exposure to substantial penalties for late payment or failure to pay at all.

Making the stakes even higher, the federal government has in recent years taken steps to increase the likelihood that employment tax cases will be handled criminally. All of this means that tax advisers working with business clients cannot focus solely on strategies to minimize and pay the business's income tax obligations but also must be extremely vigilant regarding employment tax duties.

The Tax Division of the U.S. Department of Justice (DOJ) pursues both civil litigation and criminal investigations and prosecutions for failure to comply with employment tax obligations. Recently, the DOJ has increasingly emphasized criminal prosecution of those who fail to comply with their obligations to withhold, account for, and pay over federal employment taxes.

The role tax professionals play in detecting and addressing nonpayment early is becoming increasingly important. The Treasury Inspector General for Tax Administration (TIGTA) published a report about trends and recommendations for enforcement of employment tax obligations. TIGTA found that the number of employers with 20 or more quarters of delinquent employment taxes had grown from approximately 5,000 in 1998 to nearly 17,000 in December 2015. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.