Yesterday the IRS announced the results of a nationwide two-week “education and enforcement campaign” regarding employment tax compliance. For several years, the IRS has made employment tax compliance a top enforcement priority, on both the civil and criminal sides. With payroll taxes withheld from employee wages accounting for nearly 72 percent of all tax revenue collected by the U.S. Treasury, employment tax noncompliance is one of the biggest problems for the IRS. The IRS announcement revealed that between March 25 and April 5, IRS Field Collection and IRS Criminal Investigation undertook a special campaign “to shore up this area of compliance.”
“Payroll taxes form a key part of our tax system,” said IRS Commissioner Chuck Rettig. “When individuals and businesses evade their employment tax obligations, it not only undermines our tax system, it also creates an unfair situation for people who are following the law. The IRS is committed to compliance in the payroll tax arena, which helps ensure fairness and faith in our tax system.”
On the civil side, IRS revenue officers made personal visits during the two-week campaign to nearly 100 businesses around the country suspected of having serious issues with employment tax compliance. Business owners were informed about ways to catch up with back payroll taxes, how to stay current and the potential for civil and criminal penalties. The Trust Fund Recovery Penalty is one example of the legal ramifications of not collecting, accounting for and paying payroll taxes to the IRS when required. “Enforcement is never our first resort, but protecting this significant source of revenue to the nation deserves our best efforts, including reaching out to help businesses help themselves,” said Darren Guillot, Director of IRS Field Collection Operations.
On the criminal enforcement side, IRS CI worked with the Department of Justice Tax Division and U.S. attorneys around the nation to focus on about 50 law enforcement actions related to employment tax crimes. During the two weeks, IRS CI indicted 12 individuals, executed four search warrants and saw six individuals or businesses sentenced for crimes associated with payroll taxes. In addition to these early numbers, roughly two dozen more enforcement actions are planned in the weeks following the two-week campaign as well.
“Employers know the rules—they must deposit and report employment taxes accurately—this is non-negotiable,” said Don Fort, Chief of IRS Criminal Investigation. “When employers fail to pay over the required employment taxes for whatever reason, they skip out on one of their most important responsibilities as a business owner. Not only are those employers cheating the system and their employees, they are cheating future generations relying on those taxes to help build the future.”
The IRS noted in its announcement that the agency has several tools to bolster payroll tax compliance including educational outreach, data analytics, civil investigations by highly trained revenue officers, as well as harsher measures such as lawsuits, seizures, and criminal referrals to IRS CI.
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