Having a small payroll tax problem? Payroll tax audits, investigations and even penalties used to be routinely handled quickly by most payroll service providers. That is no longer the norm! Since 2018, it has become more apparent that a payroll tax matter can quickly become a criminal case. Payroll tax evasion cases have become a top enforcement priority by the U.S. Internal Tax Revenue (IRS).
Common Tax Fraud Activities
The most common fraudulent tax activities listed by the IRS include:
False exemptions or deductions
A false or altered document
Failure to pay tax
Failure to withhold
Failure to follow the tax laws
The IRS is aware that a large portion of payroll taxes is underpaid or not paid.
There is a common understanding that the IRS can detect tax fraud by scouring through medical records, credit card transactions, and other electronic information. In addition to that method, the IRS is singling out taxpayers for tax evasion by searching through social media accounts. While there were suspicions, it was not until late 2018 that it was confirmed by the IRS that they comb through social media accounts to cross-reference tax claims.
IRS agents look at social media for signs that taxpayers have more assets or income or have more clients than is shown on their tax returns.
Also, add to the fact that the IRS now uses artificial intelligence and big data to more effectively identify taxpayers for investigation.
“Businesses and individuals increasingly use social media to advertise, promote, and sell products and services,” the IRS solicitation reads. “For example, taxpayers can create ‘online stores’ on social networking sites free of cost. Much of this information is unrestricted, allowing the public, businesses and various governmental agencies to discover taxpayers’ locations and income sources. But the IRS currently has no formal tool to access this public information, compile social media feeds, or search multiple social media sites.”
While the IRS does not investigate every tax evasion case as a criminal matter, those that are caught receive harsh punishments. In addition to repaying taxes, with penalty fees, guilty parties can face up to 5 years of jail time.
What To Do If You Suspect Tax Fraud
Pro Tip: Review all your company’s social media posts carefully, as an IRS agent would. Also, as a business owner, do the same for your personal and family members’ social media accounts.