If You Owe Over $100,000 in Federal Employment Taxes and You Cannot Fully Pay – You need an Attorney. Period!

The IRS New Policy is Wrongfully Creating a Debtors’ Prison for Employment Taxes Debts.

The Criminal Division of the Internal Revenue Service in Los Angeles has recently changed its policy regarding whether the failure to collect and pay employee withheld employment taxes is criminal. I was an Attorney for Chief Counsel of the Internal Revenue Service in Los Angeles in the late 1990s to early 2000s. During that time, the culture of the IRS in Los Angeles was that a failure to collect and pay the employees withheld taxes was only a crime if the IRS could establish classic badges of tax fraud or tax evasion.

Now the policy of the IRS Criminal Division is that the IRS will prosecute a tax crime by establishing only two factors: (1) that an individual is a responsible person to file and pay the tax, and (2) that the individual willfully failed to pay the tax.

Our firm has seen a significant rise in the number of Los Angeles employment tax criminal cases involving failing to pay collected employee withheld taxes. Failure to pay employment taxes is now a seriously risky situation. The IRS Policy is overbearing and wrong. It is effectively creating a “Debtors’ Prison” for employment taxes.

If you owe over $100,000 of employment taxes, we do not recommend that you engage a Certified Public Accountant or Enrolled Agent to negotiate an installment agreement. Anything you say to them is not protected by the attorney/client privilege. All the documents, notes and emails in your accountants’ possession will be obtained by the Criminal Investigator through summonses or grand jury subpoenas. Your accountant will be forced to testify under summons or subpoenas regarding anything and everything they know you had done or said. You have no protections if you engage an accountant to assist you.

We recommend that you engage a qualified Former IRS Tax Attorney to represent you to negotiate the payment of your employment taxes if they exceed $100,000 or there are any additional criminal risk factors.

If you have any questions regarding strategies to reduce or eliminate the risks associated with failure to pay employment taxes, please call Holtz, Slavett & Drabkin, ALPC, at (310) 550-6200.

David C. Holtz is a Corporate Tax Attorney and a principal of Holtz, Slavett & Drabkin, APLC.  David was an IRS Attorney in the Office of Chief Counsel of the Internal Revenue Service in Los Angeles. His practice focuses on Corporation Tax matters such as Corporation Tax Audits and Corporate Tax Collection matters.