Prosecution of Criminal Employment Tax Crimes is on the Rise

According to IRS data, in fiscal year 2014, 120 employment tax cases were opened for tax evasion investigation. Of those, 92 were recommended for prosecution and 82 received federal sentences. These numbers are set to increase, not only in federal cases, but in California cases as well. Caroline Ciraolo, Acting Assistant Attorney General for the Department of Justice Tax Division, has indicated that increasing criminal enforcement for employment tax crimes is a priority of the DOJ Tax Division. The maximum sentence for the willful failure to meet payroll filing and payment obligations is 5 years with penalties as high as $200,000.

California is also increasing efforts to thwart employment tax crimes, in part, through the California Labor Enforcement Task Force (LETF). Since its inception in 2012, the task force has inspected more than 4,300 businesses suspected of operating in the underground economy which includes violations of not only payroll taxes, but also cheating workers on their earnings, and not complying with workers compensation and workplace health and safety laws.

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