Health & Fitness
Payroll Tax Debt in Greenwich, CT: What Happens When the Business Can’t Pay the IRS the Payroll Taxes - Part III.
In this final segment we discuss the issue of when the IRS decides to pursue the unpaid payroll taxes as a criminal offense, prosecuting the responsible parties criminally.
We represent taxpayers involved bankruptcy & financial restructuring and civil and criminal taxpayer representation. In Part I of this series we reviewed the basics of the payroll tax assessment process. We represent many business owners in Greenwich, Connecticut and elsewhere dealing with outstanding payroll tax liabilities. In Part 2 of this series we discussed the personal assessment of the “Trust Fund Recovery Penalty” against the responsible individuals. In this third installment we will review at what point the IRS decides to pursue the unpaid payroll tax liability as a criminal tax matter.
Go back just 5 years and it was rare to see the IRS pursuing unpaid payroll taxes criminally. Today however, it is much more frequent that we see criminal tax prosecutions.
The IRS identified unpaid payroll taxes as a significant part if the $385 billion “Tax Gap” the US has every year. Since then the IRS has brought many more resources to bear on the issue of unpaid payroll taxes.
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Before business owners go into panic, the IRS knows that nearly 80% of businesses fail. What the IRS will focus on is not the fact that the business failed or that the taxes went unpaid. What will be of concern to the IRS (and the IRS Criminal Investigation Division) is the taxpayer’s own behavior while this occurred.
What we mean by this is the following:
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· Is this the first time the taxpayer failed to pay the payroll taxes or has the taxpayer had other businesses that also failed to pay the payroll taxes? Taxpayers who have multiple businesses fail to pay the payroll taxes begin to look like thieves because it now is a pattern of behavior, rather than a simple failed business.
· The taxpayer’s life style. While the taxpayer was incurring the debt were they spending freely on other items? Did they have lots of “toys” like boats, cars, etc.
· Claiming withholding on his or her own tax return. This may be obvious but if the owner knows they failed to pay the payroll taxes, they should NOT claims any withholding on their own tax returns. Often in criminal tax cases we see an owner not only claim withholding but seek a refund as if they overpaid, knowing the business they controlled failed to pay the taxes.
IRC § 7202 allows the government to prosecute individuals who willfully fail to collect, account and pay over the payroll taxes, and the violation of any one of the those three issues is enough for prosecution. The unpaid non-trust fund portion of the payroll taxes may also be charged under IRC § 7201 (tax evasion).
The federal government continues to have a more than 90% conviction rate for tax cases taken to trial. Why? Because though jurors dislike the IRS, they hate other taxpayers who did not pay his or her fair share of taxes even more. A high lifestyle by the taxpayer and a fancy Greenwich, Connecticut address will also not help the case. Taxpayers when tried by a jury of his or her “peers”.
If you have any questions about Payroll Tax Issues or criminal tax issues in Greenwich, Connecticut or elsewhere please feel free to contact me at (203) 285-8545 or by email at egreen@gs-lawfirm.com.
243 Tresser Boulevard, 17th Floor
Stamford, CT 06901
Ph. (203) 285-8545 x 102
Fax (203) 286-1311
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