Ensuring your payroll taxes are promptly paid is a key compliance issue for businesses of all sizes.
The Internal Revenue Service (IRS) places a priority on enforcement around the timely and accurate pay over of employee wage withholdings. Employee payroll taxes fund state and local government as well as provide important social security benefits to the worker.
It is not unusual to hear that a business owner or employer collected but did not pay withholding taxes due. A bottom line awash in red can push an owner to “borrow” from payroll taxes to try to straighten out the business. Other times, this particular tax crime occurs when an employer decides they need the money to live a higher quality of life or drive an expensive car.
The IRS pursues civil and criminal tax investigations against employers who fail to turn over and account for the payroll taxes they owe. But what if the employer has no idea the wage withholding is not being paid?
In October of this year, a federal jury convicted the Chief Financial Officer (CFO) of an Oklahoma business for employment tax fraud. The CFO, Christina Anglin, was both the Controller and CFO for a business located in Norman, Oklahoma. Her job duties included withholding payroll taxes and paying them over to the IRS. During 2018, Ms. Anglin paid over to the IRS payroll taxes for only one quarter during the year. Overall, the amount she failed to pay over was approximately $920,000. Concurrently, Ms. Anglin approved business expenditures, salaries, and bonuses for executives in the company, including herself.
Ms. Anglin faces prison time and a good deal of restitution and fines.
In this instance, an employee cooked the books, leaving workers and her employer on the line for the missing money. Despite her culpability, the IRS does not look only to the individual to whom payroll responsibilities are delegated—her employer will also be responsible for amounts due to the IRS and then some. Delegation of duty does not reduce owner liability for payroll tax functions.
Whether your payroll service is in-house or handled by a third-party vendor, ensure you have appropriate checks and balances in place to deter and prevent payroll tax fraud. Your company—and your workers—are depending on it.
Experienced legal representation on tax litigation and employment tax disputes
From offices in Chicago and Cleveland, the tax attorneys at Robert J. Fedor, Esq., LLC help individuals and entities nationwide respond to allegations of criminal tax fraud, IRS audits, and other tax controversy. When you need responsive, legal advice locally or abroad, contact us or call 800-579-0997.