Employment Tax Delinquency Can Lead To Criminal Penalties

August 15, 2023
Accounting blog: Employment Tax Delinquency Can Lead To Criminal Penalties

Avoid Criminal Penalties – Pay Your Employment Tax

Routinely, we see businesses focus solely on minimizing spending and satisfying income tax obligations. While these things are still significant, this route can often lead to more severe problems. However, many employers see delinquent employment taxes as a necessary risk taken to maintain a balanced budget. Avoiding or ignoring employment tax payments may seem like the only option when having to balance things like payroll and trade obligations.

According to the Journal of Accountancy, a 2015 report by the Treasury Inspector General for Tax Administration (TIGTA) found that the number employers with at least 20 quarters of delinquent employment taxes had more than tripled from 1998 to 2015, In less than 20 years, the number of employers increased from 5,000 to a startling 17,000. Further adding to this increased problem, the report also found that the IRS had assessed 38% fewer Trust Fund Recovery Penalties (TFRP) from 2011 to 2015, due in large part to a decrease in their personnel. 

Fewer TFRP assessments by the IRS mean the potential for more substantial criminal charges in the future. A lack of immediate consequence may give an employer a false sense of security. However, continuing non-payment will only further increase your debt and chances for a criminal referral. For this reason, it is crucial to work with your tax professionals to detect and correct any delinquent tax payments. The earlier you can start paying off employment tax debts, the less likely your business will face criminal penalties.


What is the Best Plan of Action?

Unquestionably, the best plan of action is to make your employment tax payments on time. According to The Tax Adviser, the IRS has “stepped up” their pursuit of criminal charges for the failure to collect and pay employment taxes. However, if your business is already in debt for delinquency, it’s not too late. Discuss your financial situation with a tax professional. Find a practical and achievable plan to pay off your employment tax debt.

One critical step in the road to clearing your business’s federal debt is making sure to delegate as much of your voluntary payments to the trust fund portion of your debt as you can. The sooner this part of the delinquency is paid off, the less likely a TFRP assessment by the IRS will occur. Therefore, the likelihood of a subsequent criminal investigation decreases tremendously. Doing this can help minimize the financial exposure of any persons who may be responsible under Sec. 6672.

In any event, it is always advisable to discuss your business’s financial situation with a tax professional. Stay on top of your employment tax payments. Avoid future financial problems.

Contact Volpe Consulting & Accounting today for a free consultation!

More from our blog