Large Firm Skills
With Small Firm Service

Never play around with your payroll taxes

On Behalf of | Apr 8, 2021 | Criminal/Civil Tax Litigation |

Recently, a plumbing executive from Great Falls, Montana, pled guilty to employment tax fraud.

It’s all too easy to get caught up in employment tax fraud. People often do when their businesses are in temporary trouble and need some quick cash. Although employment taxes are to be paid quarterly, three months can seem like a long time. People sometimes underestimate the amount of time they will need to pay back funds they borrow from their employment taxes.

The Montana plumbing executive appears to have borrowed money from his employment taxes to pay off other creditors and also to pay personal expenses. He failed to pay those employment taxes for several quarters between 2005 and 2016. The federal tax loss totaled over $550,000.

The executive is set to be sentenced on June 24. He faces a maximum penalty of five years in prison, along with supervised release, restitution and tax penalties.

It’s crucial to know that you could be personally liable for any unpaid employment taxes.

Willful avoidance of federal employment taxes is a felony

The tax penalties start off small. Being one to five days late with your payroll taxes could get you a 2% penalty. Fifteen days late and you’ll see a 5% penalty. After that, you are looking at a 10% penalty.

Each month that you fail to withhold or pay income of FICA taxes as required, the IRS can impose a penalty of up to 100% of the taxes owed.

If the IRS determines you have acted willfully to evade paying your federal employment taxes, you could be imprisoned for up to five years and also fined.

It may seem like your employment taxes are a convenient source of short-term cash that could be used for other purposes. Don’t take the risk.