New York Payroll Tax Fraud Lawyer
Payroll tax fraud involves deliberate actions to falsify or misrepresent payroll taxes associated with wages earned. This falsified information is reported on either the state level, the federal level or both. Typically payroll taxes are due to both the Internal Revenue Service (IRS) as well as to the state of New York. Payroll tax fraud is also referred to as a form of tax evasion in that the person involved has performed such acts with the intent to evade paying the appropriate amount of payroll taxes. These acts can occur by an employer, an employee or a tax preparer. It involves allegations that have very serious consequences if one is found guilty.
Being found guilty of payroll tax fraud can result in fines and penalties, more serious criminal charges and even incarceration. The following are typical payroll tax fraud cases along with what you can do if you are charged with such issues.
What is Payroll Tax Fraud?
Payroll tax fraud involves deliberate actions to falsify or misrepresent payroll taxes associated with wages earned. This falsified information is reported on either the state level, the federal level or both. Typically payroll taxes are due to both the Internal Revenue Service (IRS) as well as to the state of New York. Payroll tax fraud is also referred to as a form of tax evasion in that the person involved has performed such acts with the intent to evade paying the appropriate amount of payroll taxes. These acts can occur by an employer, an employee or a tax preparer. It involves allegations that have very serious consequences if one is found guilty.
Who Can Commit Payroll Tax Fraud?
| Perpetrator | How Fraud is Committed |
|---|---|
| Employees | Misrepresent payroll records on W-4 forms to reduce taxes owed |
| Employers | Falsify payroll tax returns; create fake employee records |
| Tax Preparers | Intentionally falsify or alter payroll tax information on returns |
Consequences of Being Found Guilty
Being found guilty of payroll tax fraud can result in fines and penalties, more serious criminal charges and even incarceration. The following are typical payroll tax fraud cases along with what you can do if you are charged with such issues.
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(212) 300-5196Potential Penalties for Payroll Tax Fraud
| Consequence | Description |
|---|---|
| Fines and Penalties | Significant financial penalties from IRS and state of New York |
| Criminal Charges | Serious criminal charges for tax evasion |
| Incarceration | Jail time depending on severity of fraud |
| License Revocation | For tax preparers, loss of professional licensing |
| Restitution | Required to pay back all unpaid taxes plus interest |
1. Consult with an Attorney
If you are involved with payroll tax fraud in any way it is important that you seek the guidance of an experienced attorney who specializes in payroll tax fraud issues. This should take place as soon as possible. It will allow you to reduce the risk associated with such allegations and if needed, obtain legal representation as quickly as possible. An experienced attorney can evaluate your case and determine what needs to take place to protect your rights and your legal interest.
Why Immediate Legal Consultation is Critical
- Reduce risk associated with allegations
- Obtain legal representation as quickly as possible
- Evaluate your case and determine next steps
- Protect your rights and legal interests
- Work with IRS and state authorities on your behalf
- Help gather necessary evidence
2. Gather Evidence That Support Your Claim
You will need to work very closely with your attorney and obtain all necessary supporting documents that are associated with your case. They can be used to help your attorney best represent and settle your case in your favor. This can be a relatively simple task or it can be very complicated depending on how many years are involved with the alleged payroll tax fraud. For example, wages and salaries may have been reported inappropriately years prior to the allegations that are being made against you which requires more research.
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Supporting Documents You May Need
| Document Type | Why It’s Needed |
|---|---|
| W-4 Forms | Shows employee withholding elections and potential misrepresentations |
| W-2 Forms | Annual wage statements; shows reported wages and taxes withheld |
| Payroll Tax Returns | Federal and state returns filed by employer |
| Employee Payroll Records | Documentation of wages earned, taxes withheld, and payments made |
| Bank Statements | Proof of actual payments made to IRS and state |
| Personal Income Tax Returns | Individual returns showing reported wages and taxes paid |
| Historical Records | May need records from years prior to current allegations |
This can be a relatively simple task or it can be very complicated depending on how many years are involved with the alleged payroll tax fraud. For example, wages and salaries may have been reported inappropriately years prior to the allegations that are being made against you which requires more research.
You own a mid-size construction company in New York and have been paying several workers off the books to avoid withholding federal income taxes and FICA contributions. You just received a notice from the IRS indicating they are opening an audit into your company's payroll tax filings for the past three years.
What kind of criminal charges could I face for underreporting my payroll taxes, and is there any way to resolve this before it escalates?
Payroll tax fraud can result in serious federal charges under 26 U.S.C. § 7201 for tax evasion, carrying up to five years in prison and fines of $250,000, as well as charges under 26 U.S.C. § 7206 for filing false returns. At the state level, New York Tax Law § 1800 and related provisions can impose additional criminal penalties, including felony charges for systematic underreporting. However, early intervention by an experienced attorney can sometimes allow you to enter the IRS Voluntary Disclosure Practice or negotiate a resolution before criminal referral is made to the Department of Justice. The key is acting immediately — once a criminal investigation is formally opened, your options narrow significantly, so retaining counsel now gives you the best chance of mitigating the consequences.
This is general information only. Contact us for advice specific to your situation.
3. Payroll Tax Fraud Committed by Employees
There are times when payroll tax fraud is performed by an employee. This typically takes place when an employee misrepresents their employee payroll records to reduce the amount of payroll taxes owed. This often takes place when an employee completes their W-4 form. This is the form that employees submit to employers so the proper amount of income tax can be withheld from the employee’s paycheck. This is important because these withholdings must be paid to the IRS and the state of New York on a monthly, quarterly, or an annual basis. At the end of the year employers issues a W-2 form to their employees. If fraud has been committed by the employee, the W-2 form will also have misrepresented taxes reported. W2s are also used personal income taxes are prepared. When employees falsify their payroll tax information, it creates a snowball effect that also results in employers reporting and paying the incorrect amount of payroll taxes as well. This happens because employers are required to match certain employee payroll taxes (mainly FICA Taxes). If the employee’s payroll taxes are incorrect, then the employer’s payroll taxes are reported inaccurately as well. Hence, payroll tax fraud committed by employees impacts their payroll taxes that they’re responsible for and the payroll taxes that the employer is responsible for also.
