Recognizing Payroll Tax Fraud

Payroll taxes are the taxes that employers are required to pay to cover programs like Social Security and unemployment compensation. The taxes come from employees’ wages, and employers withhold portions of employees’ paychecks to cover these financial obligations. Failing to pay the withheld money to the government, falsifying documents related to payroll tax, and attempting to circumvent payroll taxes are all forms of payroll tax fraud.

If you have good reason to suspect your company is committing payroll tax fraud or another type of tax evasion, do not keep your concern to yourself. When you act as a whistleblower, you are legally protected against retaliation from your employer.

Payroll Tax Evasion Techniques

There are numerous ways employers attempt to evade their responsibility to withhold payroll taxes and pass them on to the state and federal governments. These include:

– Paying employees in cash. Also known as paying employees “under the table,” compensating them in cash means there is no record of the compensation, which in turn means there is no recorded wages upon which the government can require taxes;

– Pyramiding. With this technique, employers do withhold payroll taxes from their employees’ checks, but then fail to pass them onto the government as required;

– Employment leasing. Sometimes, it makes financial and administrative sense for a company to outsource the handling of payroll and other employment matters to third party companies. This practice is known as employment leasing. Although employment leasing is not illegal in itself, it can be used as a payroll tax evasion scheme when employment leasing companies fail to pay some or all of the payroll taxes they collect;

– Falsifying payroll tax documents. When an employer misrepresents an employee’s wage in an effort to pay less in payroll taxes, they are committing payroll tax fraud; and

– Failing to file employment tax returns. This is the most straightforward form of payroll tax fraud: employers simply refuse to file employment tax returns, leaving their required taxes unpaid.

What Should I Do if I Suspect my Company is Committing Payroll Tax Fraud?

Document everything you can to support your claim. This will be how you substantiate your claim to upper management, regulatory authorities, the Internal Revenue Service, or local law enforcement.

Determine whether your company has a system in place for making anonymous reports to its owners. If so, use this system to make your report. Discuss your case with an experienced whistleblower protection lawyer who can advise you about how to protect your rights while pursuing justice. Depending on the circumstances of your case, you could receive a monetary reward for coming forward with valuable information about your employer’s actions.

Work with an Experienced Chicago Employment Lawyer

For legal advice, support, and representation as you take action as a whistleblower, work with an experienced employment lawyer. Contact our team at North Suburban Legal Services LLC today to set up your initial consultation with us to discuss your case and your options in greater detail.

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