The 2000 film, “The Perfect Storm”, details the harrowing events of the fishing vessel, Andrea Gail. In the film, the ship and crew were lost at sea as a result of numerous weather elements coming together to form a force of nature that was unstoppable. A similar storm may be forming with respect to the enforcement and collection of unpaid payroll taxes.
A year ago, the Treasury Inspector General For Tax Administration (“TIGTA”) published a report in which they indicated a greater need for a focused strategy in effectively addressing egregious employment tax crimes. In the report, TIGTA recommended that criminal prosecution be sought by the Department of Justice more frequently to create a greater general deterrent.
Additionally, on March 2nd 2018, Deputy U.S. Attorney General Rod Rosenstein stated that the Trump administration would vigorously pursue offenders that fail to pay payroll taxes. The criminal offense associated with failing to pay payroll taxes is set out by 26 U.S.C.§ 7202. It states that “Any person required under this title to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both, together with the costs of prosecution.”
These reports and comments are typically heard as rhetoric intended to encourage compliance, however a recent case from Wisconsin brings potential for concern. While prosecution rarely happens for minor offenses of 26 U.S.C.§ 7202, a Wisconsin business owner, Gary Auerswald, was recently targeted for prosecution by the US Attorney from the Western District of Wisconsin. What makes the case unique is that the amount in question was only $24,482.43 and only for the 4th quarter of 2014. While there may be more to the story that is unknown, this may also be the start of the crackdown Rosenstein spoke of.
One thing is for certain; there has never been a more important time to get in front of back taxes, especially unpaid and unfiled payroll taxes. If you think your business may have delinquencies, do not hesitate to contact us and see how we can help you get out in front of any delinquencies and not be another target for the US Attorney to prosecute.