Payroll tax fraud is the intentional misrepresentation or reporting of false or inaccurate wage income information to the Internal Revenue Service (IRS). Payroll tax fraud is also characterized as tax evasion, due to the reporting party’s effort to evade paying the appropriate tax amount. Payroll tax fraud can be committed by either an employee or an employer. The allegation of tax fraud is very serious and the consequences of being found guilty of the same can range in severity from penalties and fines, to criminal charges and incarceration. If you are involved in a situation pertaining to payroll tax fraud it is imperative that you speak an attorney who is experienced in this area of law, as soon as possible. Here, are a few examples of payroll tax fraud, and what to do if you are confronted with this legal issue.
1. Payroll Fraud Committed by Employees
Employees have been accused of committing payroll fraud by altering payroll records for their own benefit or for the benefit of another employee. In other instances, payroll managers and other employees in charge of payroll have been accused of creating false employees for the business they work for in order to receive the fake employees wage earnings. Although there are far more examples of payroll fraud schemes occurring in the work place, it is important to know that the allegation of payroll fraud is very serious and should be considered so in your determination whether you need legal representation.
2. Payroll Fraud Committed by Employers
Employers also find themselves on the wrong side of allegations regarding payroll fraud. For example, it has been alleged that employers have filed false payroll tax returns, or have filed false or inaccurate W-2 statements for their employee(s) in an effort to evade paying appropriate taxes. The impact of an allegation of fraud for any business can be detrimental both to the business reputation, and to the business financially given the potentially severe consequences of being found guilty of payroll tax fraud.
3. Speak with a Lawyer
Whether you’re an employer or an employee involved in allegations of payroll fraud, it is prudent that you speak with an attorney as soon as possible. In consulting with an attorney, you can determine if your issues require legal representation. If so, your attorney can immediately take measures to protect your interests and rights. Although there are many general practice attorneys who can represent you in court on allegations of fraud, there are many challenges to a case involving payroll fraud. Therefore, it is important to consult with and retain an attorney or law firm that is specifically experienced in this area of law and litigation.
4. Gather Evidence and Information Relevant to Your Claim
Once you have retained legal counsel, it is imperative that you and your attorney work together to obtain all relevant documents and information necessary to support your position or allegations. Having all of the information and evidence compiled in the early stages of litigation or settlement discussions, is extremely important. Not only does it give your attorney the confidence he or she needs to represent your claim effectively, it also gives your attorney the possible leverage he or she needs to steer the other side into settlement rather than protracted litigation.
5. Next Steps
If you and your attorney are unable to gain the other sides cooperation in settling the matter outside of court proceedings, than you and your attorney can discuss the next steps necessary in order to resolve the issue most effectively. If criminal fraud charges have been filed in your case your lawyer can speak with the district attorney and Judge directly on your behalf.
Dealing with your current or former employer, or your current or former employee, regarding payroll tax fraud allegations can be a daunting task. Matters are further complicated if the district attorney has filed criminal charges. In either situation your option is to have an experienced payroll tax attorney on your side.
Payroll tax fraud is more common than you think. It does not necessarily always involve an intentionally criminal act in order to violate the tax laws. The Employment Development Department (EDD) is responsible for identifying payroll tax fraud and typically acts very swiftly when it finds about about potential fraud. This can happen just by mistakenly providing the wrong employee information to the EDD or not providing enough information about an employee. If there is a misunderstanding between your payroll department and the EDD, this can be something that is rectified with the EDD, but it is much easier to handle with a skilled attorney negotiating on your behalf. The worst thing you can do is ignore a notification from the EDD that your business is under investigation for payroll tax fraud because it could lead to very serious consequences down the line.
Some businesses attempt to hire employees “under the table” to avoid responsibility for payroll taxes. Instead of paying those employees in the traditional sense, businesses will use a cash system to try to avoid detection by the EDD. Another way that businesses get in trouble with the EDD is by improperly classifying employees as independent contractors so that they do not have to pay payroll taxes for them. If an employee is working for a business on a regular basis, he or she is not truly an independent contractor. The classification of regular employees as independent contractors is an issue that spans many different industries. Small businesses often think that they can more easily skirt the line on this issue because the size of their payroll is not large enough to catch the government’s attention. This is not a good approach to take when it comes to managing your business’s payroll because it can land you in a world of hurt very fast.
If you receive notice that your business is under investigation by the EDD, you should act quickly to hire an experienced payroll tax fraud lawyer to help you navigate through this scary and intimidating process. You could be subjected to search warrants and surveillance if the EDD investigation is based on suspicion of criminal activity. This is not something that you want to face without the support and advice of a talented lawyer on your side. Even if you had no intention of doing anything criminal, your business could be exposed to heightened scrutiny from the government just by being flagged for potential payroll tax fraud. This can lead to negative press and is a risky situation for any business to find itself in.
When it comes to choosing a lawyer to defend your business in a payroll tax fraud investigation, you should make sure that your attorney has experience in this area of law and can point to other business clients who have received favorable outcomes. A lawyer should be able to negotiate a more favorable settlement on behalf of your business with the EDD. Even if you end up having to pay out of pocket for payroll taxes owed, you may get a much better deal with the government by relying on the representation of an experienced attorney.
Even though finding out that you may have an issue with payroll tax fraud can be daunting at first, responding to the investigation quickly and in a way that will not harm your business in the future is within your control. Consulting with a trusted payroll tax fraud lawyer is the first important step you can take in making this problem a thing of the past. Make the decision today to do something about your payroll tax fraud problem so that your business can continue to prosper.
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