A jury found a Colorado man guilty of failure to pay federal payroll taxes pursuant to IRC § 7202 and of filing false payroll tax returns pursuant to IRC § 7206(1). He was, however, acquitted of charges of tax evasion. Failure to pay IRS payroll taxes carries a penalty of up to 5 years in prison, and/or a $10,000 fine per count. Filing false tax returns, including false payroll tax returns carries a penalty of not more than 3 years in federal prison, and/or a $100,000 fine per count.
Like all employers Crabbe was required to file payroll tax returns, and to withhold income income taxes, social security taxes and Medicare taxes from employee paychecks, and to pay those amounts over to the IRS. When he failed to do so he exposed himself to both criminal tax liability, and to the trust fund recovery penalty (TFRP) as well. Once Crabbe has been sentenced it is likely the IRS will go after him to pay the unpaid payroll taxes. In general, responsible corporate officers who willfully fail to pay payroll taxes become personal liable pursuant to IRC § 6672 to pay those taxes. While many business owners get stuck paying corporate payroll taxes out of their own pocket, not too many go to jail for failure to pay. Nevertheless the case is a reminder that in appropriate situations the IRS can and does criminally prosecute people for failure to pay.
If you have payroll tax problems contact the tax attorneys at Brager Tax Law Group.