11 CALL FOR ACTION ALERT: IRS warns about tax fraud violation

This an 11 Call For Action report.
Published: Aug. 17, 2022 at 12:27 PM MDT|Updated: Aug. 18, 2022 at 1:18 PM MDT
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COLORADO SPRINGS, Colo. (KKTV) - 11 Call For Action has an important alert about tax fraud violations.

It’s crime that could happen to anyone. It could even happen to you.

11 News consumer reporter Katie Pelton sat down with Assistant Special Agent in Charge Amanda Prestegard to talk about how business owners can prevent payroll fraud and what employees can do if they are a victim. Below is the full conversation:

KATIE PELTON: FIRST OF ALL, LET’S TALK ABOUT WHAT THE IRS CRIMINAL INVESTIGATION ARM DOES?

Assistant Special Agent in Charge Amanda Prestegard: “So we investigate all types of financial crimes, but of course, our main focus is on tax crimes: people who are failing to pay into the Treasury and are going to great lengths to not pay the taxes that they owe, and also those who are scamming taxpayers, whether that be return preparers or, unfortunately sometimes, employers or caretakers who are not turning over the taxes that they owe or helping their clients or employees turn over the taxes that they owe.”

THE IRS CRIMINAL INVESTIGATION HAS COVERED SEVERAL TAX FRAUD CASES. CAN YOU EXPLAIN TO US WHAT SOME THE TAX FRAUD VIOLATIONS ARE? WHAT’S INCLUDED?

“Right, so there are a host of violations that are included in the Internal Revenue code, but the ones that are at the forefront for us are tax evasion -- people who are going to great lengths to avoid paying what they owe -- and then there is violations related to return preparers, either those who are aiding and abetting in the filing of false tax returns or those assisting in preparing tax returns that provide false information. And then we also have obstructing the IRS, keeping us from doing our duty to help to assess and pay over taxes, so there are a lot of violations, and it’s just definitely across the board important for people to be very aware of the taxes they are filing, be aware of everything that is going into their tax return, whether they prepare it or they have somebody else prepare it, because ultimately their name is the one signed at the bottom of the tax return and they attest that everything is true and correct on that tax return.”

AND YOU’RE THE ONE WHO WOULD BE HELD LIABLE. PAYROLL FRAUD REALLY DOES IMPACT A LOT OF FOLKS. EXPLAIN HOW IT AFFECTS EMPLOYEES WHO ARE IMPACTED BY THIS.

“Right, so the IRS, a lot of what people think is that when we investigate these crimes, it’s the government that is the victim, right, but the tax due and owing is not paid into the IRS. But when it comes to payroll or employment taxes, it’s really the government that is the victim or sometimes the employee can be the victim. Because if you have -- and you’ll see on your W-2 or your payroll statement -- that there is money that is withheld from your paycheck, that is to be paid over to the IRS. However, if the employer is not turning that over to the IRS, and then also in some instances we’ve seen of someone hiring a payroll company, and their job is to withhold that money and pay it over to the IRS -- if that is not done, that not only affects the money owed to the IRS, but it also affects Social Security, because your Social Security that you’re ultimately going to get in retirement, that is calculated based on what you pay into the IRS as federal withholding. That can affect Medicare calculations and Social Security. So it is the employee directly who is impacted when that is withheld and not paid over. On top of the fact that then that is money owed to the IRS that the employer or payroll company is using to, you know, line their pockets. So it really is in the best interest of the employees to check themselves to make sure there is money in Social Security, myssa.gov, to make sure that their wages are being calculated and accounted for by the Social Security Administration.”

AND THAT IS WHO THE EMPLOYEES NEED TO REACH OUT TO, TOO, IF THERE’S A PROBLEM, RIGHT? THEY NEED TO GET IN CONTACT WITH THE SOCIAL SECURITY ADMINISTRATION.

“Exactly, yes. If they understand that maybe it was not withheld, or they get any inkling that their employer is not doing the right thing by properly withholding and paying over, then their first step would be to check myssa.gov to see if their wages are being properly reported and calculated.”

AMANDA, WHAT IS THE PENALTY FOR SOMEONE WHO IS DOING SOMETHING LIKE THIS? THE FINES CAN BE PRETTY STIFF.

“Absolutely, yes. When you do not pay over to the IRS, there are always fines and penalties due to the late payments or there is also a fraud penalty that can be 25 percent or more if you’re not timely filing and paying over. So that is also something that creates a huge problem for employees and also small businesses that rely on somebody else to do their employment taxes. Because if you have not paid into the IRS timely, there is now going to be penalties and interest. Then I will say, we have a number of examples of criminal investigations we have done and cases that have been indicted for failure to pay over your employment taxes. And obviously, the sentences are up to the judge, but we have seen very steep sentences, 10 years or more, for people who have a pattern of not properly withholding or paying over to the IRS for their business or for a number of businesses they are representing. So this is certainly something that is important to us. ... There’s a huge gap in the U.S. of what is owed for taxes, and what makes up that gap in the billions of dollars is employment taxes.

CLICK HERE for more information from the Social Security Administration about how to correct your earnings record.

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