Sept 24 --The Internal Revenue Service is increasingly taking on smaller criminal employment tax cases, tax practitioners and a Department of Justice official said during a panel discussion at the American Bar Association Sections of Taxation and Real Property Fall CLE Meeting in San Francisco.
“We are seeing these cases in some of the smaller dollar amounts lately, and I think part of the reason why is that that's where you sometimes have some of the more egregious conduct with these small business owners, as opposed to larger entities who for the most part are maybe going to make more of an effort to do things right,” Sarah Wirskye of Meadows Collier Reed Cousins Crouch& Ungerman, LLP said at the panel discussion Sept. 21.
As to what turns a civil case into a criminal one, Margaret Leigh Kessler, assistant chief of the Western Criminal Enforcement Section, Tax Division at the Department of Justice, said that it resulted from several factors.
“Often you will see an employer who has a course of conduct over quite a long period of time,” Kessler said. “They are taking aggressive action to actively hide assets once the IRS has determined they are not complying with their employment tax obligations [and] they're lying to the IRS, who is looking into their employment tax.”
Panel member D. Loren Washburn of Clyde Snow & Sessions, PC said that most criminal cases bear a “pretty egregious fact pattern,” such as an individual who opens a small business, doesn't pay employment taxes and then closes the business only to open another one shortly afterward.
“You don't have to get past about two of those before it ends up looking like a criminal case,” Washburn said.
Kessler said that whether a case gets referred for criminal prosecution also can depend on how the employer is using the withheld money.
“If they are trying to keep the business afloat, while that is not a real defense to a criminal case, it's not going to be one that is attractive compared to somebody who is taking the money to buy extravagant homes, cars, luxury items, things like that,” said Kessler.
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