Agencies Step Up Enforcement On Tax Fraud by Employers

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The Internal Revenue Service and the Justice Department plan to step up a crackdown on employers that do not send withheld payroll taxes to the federal government, agency officials said May 9.

The agencies would not make a distinction if employers use the funds so the business can survive because “spending money to keep the business afloat does not absolve the employer of the criminal conduct,” said Diana L. Erbsen, deputy assistant attorney general for appeals and review for the Justice Department's tax division.

Although officials are seeking out “the most egregious cases” in an era of shrinking resources, “you're still committing a crime. There are still victims,” said Rebecca A. Sparkman, director of operations, policy and support for criminal investigations at the IRS.

The two officials spoke at a meeting of the American Bar Association Section of Taxation.

As the government ramps up its enforcement efforts, it will be carefully scrutinizing the employment tax implications for professional employer organizations under the Tax Increase Prevention Act, Sparkman said.

The law directs the IRS to set up a voluntary certification program for these groups and it established the authority of certified professional employer organizations to pay wages and collect and remit employment taxes for worksite employees.

“We're looking at how to ensure that we put in fraud prevention and detect people that are doing the wrong thing,” Sparkman said.

“We're looking at the implications for criminal investigations—what kind of cases they will be, what will be the charges that we bring,” Sparkman said. The certification program is expected to launch later this year, Sparkman said.

Another area where the IRS is devoting significant resources is tax evasion through the use of virtual currency, Erbsen said. Financial crimes also are under scrutiny, with agents investigating suspicious activity reports in all judicial districts, she said.

To contact the editor responsible for this story: Michael Trimarchi at mtrimarchi@bna.com.