Taxes are one of the many things on a long list of obligations a business owner must address. Although entrepreneurs balance many obligations, a failure to properly deal with Uncle Sam can result in serious ramifications.
A business owner out of Nevada provides an example.
Business owner runs afoul of tax obligations — faces criminal penalties
The case involves a business owner that attempted to withhold taxes from the Internal Revenue Service (IRS). The owner intentionally failed to withhold payroll taxes. He also attempted to thwart tax obligations by using a third party in an attempt to hide money. Ultimately, the IRS became aware of these actions. As a result, the business owner was required to pay a restitution of $2,637,290 to the IRS and serve six months of supervised release.
This case provides valuable lessons to business owners. Three examples that apply regardless of the state of operation include:
- Know your obligations. Employers are generally required to withhold taxes for the IRS from employees’ paychecks. A failure to do so can result in serious penalties from the IRS. Make sure that business operations are in compliance with tax obligations to avoid these penalties.
- Know the IRS is watching. A piece in Forbes that discusses this case notes the IRS is likely to increase its efforts regarding payroll tax violations. Conduct business operations aware that the IRS is watching and that penalties for violations could become more severe in the future.
- Take contact from the IRS seriously. Notification of an investigation by the IRS is a serious matter. An audit can result in increased fees and penalties; the agency can shut down business as well as pursue criminal charges. It is wise to take action to mitigate the risk of these penalties.
As a result, business owners that find themselves questioned by the IRS are wise to seek legal counsel to protect their interests.