A couple of years ago, I received a visit from a member of the IRS’s Criminal Investigation unit. It turns out a client, call him Larry, had worked for a company that decided to not remit payroll taxes. The loss to the government just from Larry’s wages was more than $100,000 and Larry was far from the only employee of that company. As far as I know, the IRS investigates every case where payroll taxes are not remitted.
Of course, it’s easy for the IRS to find out. Every employee is going to be filing a tax return (like Larry) claiming his withholding. The IRS will quickly see that there isn’t any withholding. Sometimes it can be an honest issue (like the time where the IRS “helpfully” changed a client’s Employer Identification Number without telling him). Other times there’s an error within IRS systems. But a lot of these cases end up as just plain theft. This is a crime that has as close to a 0% chance of success that I’m aware of.
My business has employees and payroll, and I’m a check signer (and I’m an owner). I am personally liable for the trust fund taxes. We use a reputable firm for our payroll taxes because the only thing worse than paying payroll taxes once is paying them twice.
And it’s not just the IRS that takes a dim view of not remitting payroll taxes. Every state department of revenue (or taxation) has the exact same view.
If your business is having tough times, not remitting payroll taxes is absolutely, positively one of the worst possible choices (if not the worst) you can make. Don’t do it! But if you did, don’t say I didn’t warn you when two nice looking individuals in suits knock on your door and tell you that you have the right to remain silent.
That’s a wrap on our Bozo Tax Tips for 2025! Please, please don’t do these. Instead, be smart and remember (1) if it sounds to good to be true it probably is and (2) it’s almost always a whole lot easier to just pay your taxes correctly.