Justice Department Warns Against Failure to Comply with Federal Employment Tax Laws

On Tuesday, April 18th, the Justice Department issued a strong reminder to warn employers of the significant consequences that come with willful failure to comply with all Federal Employment Tax Laws.  The Justice Department takes such violations very seriously, as indicated by the title of their release, “Justice Department Continues To Sue, Prosecute Delinquent Employers.”  Employers are required to file their quarterly employment tax returns by April 30th (Q1), July 31st (Q2), October 31st (Q3) and January 31st (Q4) and pay all taxes withheld from employee wages including federal income tax as well as social security and Medicare taxes in addition to the employer’s matching amounts for social security and medicare.  (Note: If employers make timely deposits of all employment taxes due, they are granted 10 additional days to complete their filing).

Employment taxes comprise roughly $1 trillion a year in government tax revenue, thus they are a vital component of the overall tax system.  As such, the Justice Department is committed to pursuing whatever recourse is available when employers willfully avoid or delay their responsibilities to pay all employment taxes due.  IRS Commissioner John Koskinen stated, “When problems do arise, we use civil enforcement tools and, when appropriate, work closely with the Justice Department in the pursuit of criminal cases.  The collection of employment taxes is a priority area for the IRS and helps ensure fairness for employers and taxpayers.  Employers who fail to pay or withhold these taxes enjoy an unfair economic advantage over those who comply with the tax laws.”

As part of the press release, the Justice Department cited a number of recent prosecutions against employers who attempted to cheat the system either by “pyramid” taxes (shuttering a business and then opening under a new name), using employment taxes for personal expenses or to pay creditors, making “under the table” cash payments to employees to avoid taxes and filing false returns.  They also included several instances of civil and criminal actions that were brought against employers who made delinquent employment tax payments.

In 2016, the Tax Division brought injunctions against 38 employers, more than double that of 2015.  As of the release, there were already 17 suits filed against employers.  The employers who were found guilty were not only required to pay retribution for any back taxes and penalties, they also had to serve prison sentences ranging from 15 to 27 months and faced personal liability for their actions.  In addition, several repeat offenders are banned from ever operating businesses with employees again.

Calculating, withholding and accounting for employment taxes and making timely payments and tax filings is a complex and critical function for successful business.  That is why many employers decide to outsource their payroll services to Checkmate to harness our expertise and gain peace of mind so they can focus on running their business.  We guarantee our service and our dedicated Client Account Managers work closely with each of their clients to learn their unique company needs and goals to continually provide the best service.

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