This week the Department of Justice issued a reminder for employers. The first quarterly employment tax returns of the year are due April 30.
Taxes withheld from employee wages account for approximately 70 percent of the revenue collected by the IRS. Underreporting employment taxes and the failure to pay these taxes contributes to the tax gap. In the press release, the DOJ estimated the shortfall at a staggering $72 billion.
Enforcement includes more injunctions
Failing to withhold employment tax can happen when an employee is misclassified as an independent contractor. Borrowing from an account with tax withholdings may seem like a good idea to cover cash flow issues to keep the doors open. Both of these can lead to serious consequences as the federal agencies take a tough stance on any nonpayment.
Bloomberg news reported earlier this month that the DOJ Tax Division is going after companies with a poor track record for paying employment taxes. In just the first quarter of 2016, the Tax Division filed almost the same number of injunctions as they had last year.
Injunctions are an increasing part of the crackdown on employers who fail to pay employment taxes. They provide additional oversight and require the employer to pay on time and notify their revenue agent after submitting tax payments. The employer cannot transfer assets before paying taxes as well.
Failure to comply with an injunction can lead to referral for criminal enforcement. Employers are expected to know withholding requirements. When dealing with payroll tax issues, contact an experienced tax attorney to help resolve the situation.