Officials with the IRS and the Department of Justice (DOJ) recently announced that criminal investigations will increasingly focus on employment tax. As part of the Tax Increase Prevention Act of 2014, the IRS established a voluntary certification program for professional employer organizations (PEO). Many wonder whether the IRS’ increased focus on employment tax will give PEOs pause before becoming certified under the program as the certification will shift liability to the PEOs.
The government will no longer abide by a front door policy. Previously, the government extended leniency to employers who failed to pay employment taxes, but instead spent the money on the business while treating employers who spent the tax money on personal expenditures as criminal cases. Now, the government will largely disregard whether an employer spent the employment tax payments for personal or business purposes. As evidence of the shift in focus, a DOJ official pointed to the recent sentencing of Kevin Bertram, former CEO of Distributive Networks LLC, who was sentenced to 30 months in prison and ordered to pay $897,921 in restitution for failure to pay employment taxes even though court documents suggest Mr. Bertram spent the money on the business.
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