The Crackdown on Employment Tax Evasion

Posted in Offshore Account Update on December 23, 2015 | Share

The Internal Revenue Service and the Department of Justice have been aggressively moving forward with enforcement efforts to prevent U.S. citizens from keeping money in offshore accounts. The tax division of the DOJ has entered into a myriad of agreements with financial institutions, with some institutions voluntarily coming forward under the Swiss Bank Program and others negotiating settlements to resolve pending criminal charges.

Under threat of prosecution, these financial institutions are giving up information on customer accounts, and U.S. authorities have collected substantial sums of money in penalties from citizens who kept their money in offshore tax havens.

While the IRS and the DOJ will continue to move forward with pursuing tax evaders who keep their money offshore, the Tax Division has also announced a new focus on employment tax evasion.  The Acting Assistant Attorney General in the DOJ's Tax Division, Caroline Ciraolo, gave a keynote address at the Continuing Legal Conference held by the American law Institute.  At the conference, she indicated that the issue of employment and payroll taxes have become a “really big area for us right now.” 

Employers need to be aware that the DOJ and IRS are teaming up to focus on enforcing tax laws applicable to employers and employment tax withholding. A Washington DC business tax attorney can help your organization to understand its tax obligations and to respond to accusations of failure to comply with employment tax rules.


The Department of Justice Tax Division has listed employment taxes as a priority before, but Ciraolo has noted that enforcement efforts are increasing as the civil and criminal sides of the IRS have begun working more closely with the Department of Justice.  Some of the different steps being taken include broader training of IRS Revenue Officers and of DOJ lawyers, Fraud Technical Advisors, and special agents.

A spokesperson for the Internal Revenue Service-Criminal Investigation division also emphasized the topic of employment tax evasion this past May when speaking at an American Bar Association meeting on taxation issues, and the Department of Labor has also emphasized that it will be prioritizing efforts to identify situations in which employers are evading payroll tax obligations by misclassifying employees as independent contractors.

With so many federal agencies announcing their intent to look carefully at employer behavior, it is imperative for companies to ensure they are in full compliance with tax laws.  This is especially true as the DOJ criminal tax manual has updated its provisions on 26 U.S.C. Section 702, which establishes criminal penalties for a willful failure to collect or pay tax.

Ciraolo made clear that this new push for stronger enforcement of employment taxes is in addition to continued efforts to enforce tax laws on the international level. Ciraolo said “We are well beyond Switzerland at this point,” and indicated enforcement would continue in Belize, Liechtenstein, Panama, the British Virgin Islands, and other locations worldwide.

A business tax attorney like Kevin Thorn can provide guidance to companies who are concerned about employment tax evasion problems. An experienced lawyer who handles tax evasion claims can also help individuals and financial institutions caught up in the ongoing push to stop offshore tax evasion  Call for assistance as soon as possible if you are facing DOJ or IRS action.

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