We frequently represent clients who owe significant sums of back payroll taxes, to the IRS. For years it was rare to see a criminal prosecution for unpaid payroll taxes, but that is no longer the case. We have seen a significant increase in IRS criminal prosecutions, and it appears payroll taxes are a new IRS Criminal Division priority.
Internal Revenue Code Section 7202 makes it a crime for an employer to willfully fail to account for and pay over payroll taxes. We always advise our clients in Hartford, Connecticut and elsewhere to take serious steps to resolving their outstanding payroll tax issues, and the sudden cascade of payroll tax prosecutions by the IRS has simply added more urgency to the issue.
Employers who are prosecuted for willful failure to account and or payover the payroll taxes face:
- Up to 5 years in prison per violation
- Up to a $250,000 fine ($500,000 for corporations)
- Charges for the cost of prosecution
The sentence will be determined by the tax loss of the trust funds, which are those taxes withheld from the employee’s pay. However, the employer’s matching FICA taxes will often be charged under IRC Section 7201 Tax Evasion or simply brought in at sentencing as “relevant conduct.”
Eric L. Green, LL.M.
Convicer, Percy & Green LLP
41 Hebron Avenue
Glastonbury, Connecticut 06033
Ph. (860) 657-9040
Fax (860) 657-9039