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What could happen if you fail to withhold taxes from employees?

On Behalf of | Nov 11, 2022 | Criminal/Civil Tax Litigation |

Employment tax issues are a high priority for federal agencies to pursue. Not taking taxes out of paychecks when it is your legal requirement to do so could land you in a lot of trouble.

There are several ways you could get into trouble for messing up or failing to withhold taxes properly.

Willfully not withholding

If you do not withhold taxes on purpose, then you will face serious charges. If the prosecutor can prove you did not take out taxes despite knowing it was your obligation to do so, then they will likely win the case against you. Taking taxes from paychecks is not a suggestion. It is a mandatory requirement.

Withholding but not paying

Another issue is taking the money out of your employees’ paychecks but not turning it over to the IRS. If you do this, it is just as bad as not withholding at all. You are stealing money from the U.S. government and your employees.


Doing something on purpose is completely different than an honest mistake. If you had issues with your calculations or you misunderstood withholding requirements, then you will not face as stiff penalties as for something you did on purpose. You will still likely have to pay penalties and fees for not following the law correctly, but you will be able to sidestep more severe punishments.

If you pay employees, it s essential to ensure you withhold taxes properly and pay the withheld amount to the IRS or other proper authorities.  You could face prison time and harsh financial repercussions if you break tax laws purposely.