Employer who hire employees other than them selves are required to withhold payroll tax from their employees, wages, including social security taxes, medicare taxes and income taxes.
The payroll tax is to be held by the employer in a trust account refer to as “Trust Fund Taxes” account. This funds are later to be paid to the IRS.
IRS officers are very aggressive in collecting the unpaid payroll tax. They will not only garnish the business assets but they will also seek to close it. Lately and according to the following case, IRS sought criminal conviction for an employer who failed more than once to withhold and pay the payroll tax.
This case recently came out regarding an owner of a company who continued to fail to pay over payroll tax to the IRS. In that case the owner was sentenced to prison and appealed his sentence. The sentence was upheld. All taxpayers should be aware of this case because the IRS has great power to convert any failure to pay the employee’s taxes into a criminal matter. Further, to the extent that the owners continue to fail to make payroll tax deposits increases the chance of criminal liability. If there are past payroll tax liabilities the best way to avoid it turning into criminal is to be current on the present Federal tax deposits. See case excerpt below:
*1 Bruce Gregory Harrison, III, was tried and convicted on 63 counts of violating federal tax laws. Following his conviction, the district court sentenced Harrison to 144 months imprisonment and three years of supervised release. The court also ordered Harrison to pay restitution in the amount of $43,207,976 as a condition of supervised release. Harrison now appeals, and we affirm.
Harrison owned and operated several temporary staffing agencies from offices in Greensboro, North Carolina. Although Harrison employed a large workforce, he failed to file required Internal Revenue Service (IRS) forms and failed to collect and withhold, inter alia, payroll taxes. Harrison also failed to file personal tax returns for 2004, 2005, and 2006. In late 2006, Harrison sold the staffing companies to two employees. While those employees operated the companies, the payroll taxes were paid and employment tax returns were filed. In 2008, Harrison reacquired the companies and again stopped paying payroll taxes. Harrison used these withheld payments to fund his lifestyle, including the purchase of a luxury beach house and the production of two motion pictures, The court also ordered Harrison to pay restitution of $43,207,976.1 United States v. Harrison, 12-4819, 2013 WL 5486750 (4th Cir. Oct. 3, 2013).