Aspects of payroll tax payments, classification of employees, and filing accurate business returns can all lead to misunderstandings with the IRS. Problems in these same areas could also appear to be examples of payroll fraud. Honest mistake or employment tax fraud?
As we often discuss, employment tax issues are of prime interest to the IRS. Just a few types of willful employment tax fraud include:
Failing to accurately account for and deposit payroll taxes can lead to allegations of tax evasion. Because business owners who withhold payroll taxes from their employees, but do not pay over the full amount (or any of the required payment) rarely report their behavior, filing a false tax return also becomes a problem.
Classifying an employee as an independent contractor or paying workers cash under the table are common employment tax schemes.
Harder to detect are discrepancies within employee benefits and retirement programs. For an in-depth overview of running a business and remaining compliant, see our guide, “Employment Tax Fraud: What Every Business Owner Needs to Know.”
If you receive a letter from the IRS regarding what appears to be a math error or a clear accounting issue, consider consulting your accountant or trusted tax preparer to assist with questions posed by the IRS.
When the IRS sends a letter regarding specific concerns, such as missing payroll deposits, discrepancies between what you reported for business earnings and employment taxes and what the IRS records show, or other significant inconsistencies in your reporting and payments, reach out to an experienced tax attorney.
Lawyers work in different specialties. While you may have worked with your family attorney regarding your advanced directive, or with your business attorney regarding a merger or acquisition, it is important to reach out to a tax attorney who specializes in tax controversy, litigation, and criminal tax matters if the IRS raises concerns with you about tax compliance. Be sure to speak with an attorney who has significant experience working with the IRS—sooner than later.
If the IRS contacts you about audit issues, allegations of a tax crime, or other tax controversies, contact Robert J. Fedor, Esq., L.L.C. The firm focuses on matters involving the IRS. Employment tax questions can quickly become serious if the IRS suspects you have underreported withholding or income. We work with clients internationally and across the United States from offices in Cleveland and Chicago.