Even if he or she does his or her best to be careful, a business owner in Washington, D.C. may someday find themselves accused by the IRS of employment tax evasion. The agency is aggressive in pursuing businesses it accuses of failing to pay the appropriate amount of employment tax.
According to the IRS, there are several ways that employers can run afoul of its agents. Among them are:
Pyramiding. This is where the employer withholds the necessary amount of tax from its workers’ paychecks, but fails to remit those funds to the IRS. The employer sometimes declares bankruptcy to discharge the tax debt, then start a different business under a new name.
Paying in cash. Some business owners try to avoid the attention of the IRS by paying their employees in cash, to generate less of a paper trail.
Employment leasing. Hiring an outside contractor to take care of administrative and human resources matters is perfectly legal. However, if that outside company fails to properly take care of employment taxes, the client could face serious scrutiny from the IRS.
Filing false tax returns, or not filing at all. If the IRS accuses a business of mishandling or avoiding payment in this way, the business could be in serious financial trouble.
A business owner who has been contacted by the IRS, or suspects that he or she could have an employment tax problem, should strongly consider speaking to a tax attorney. It is possible that delayed action could cause the business to fail.