Employment and Tax Withholding
By Evan Bailyn 

If you are an employer responsible for the withholding of taxes from the wages of your employees?listen up! The IRS has decided to take a closer look at your financial statements. More attention is going to be paid to anything related to or concerning withholding taxes. If you want to be certain you are not handling your finances - at least the part of your finances dealing with taxes - in way that is tax law compliant, read on.

Prison Time

All of these offenses are considered serious and the penalties are apt to be quite severe. You may be committing one of them and not even know it?but ignorance may not be a valid excuse. The IRS is not known for it's sense of humor leniency when it comes to money that is due. 

• If you don't give your employees information regarding their wages and the taxes that are being withheld, you could be put away for up to a year. Or pay $1,000.00. Or both.
• If you are notified by the IRS to keep the funds that you collect for withholding in a trust account payable to Uncle Sam?and you don't?it's up to a year or $5,000.00 or both.
• If you knowingly do not collect or pay over the withholding taxes due, you could be on your way to jail for up to five years, or pay a fine of $10,000.00. Or both!

I Didn't Have the Cash

If you did not pay up, and your reasoning is that there were not enough funds available to you at the time payment came due, and you did not do anything intentionally to cause yourself to not have the funds available, you may not be penalized. In this case, the government would have to prove that you had the money at the time when payment came due and that you intentionally chose not to pay. For example, if they find that you opened a Swiss bank account so you could hide the cash, you might be in trouble.

Trying to Beat the System

An employee who lies on his exemption form could face up to a year in jail and a $1,000.00 fine for each false statement, or both. The same possible penalties also apply in the case of someone who was required to, but did not, supply the necessary information at all.

There was an Earthquake

If you were notified that you must open a trust account and make deposits, failure to do so is all that is needed for the government to prosecute. Intent does not enter into the equation at this point. There are two circumstances in which you could possibly be in the clear. If you can show:

• That it is reasonably doubtful: (a) you are the person who was obligated to collect the funds, or, (b) that collection was required.
• That you couldn't because of some situation that was beyond your control.

The government would have to prove the exception was not applicable in your case.

Article reprinted courtesy of chooselaw.com