Tax Law Center Blog

Despite staffing cuts, the Department of Justice (DOJ) continues to demonstrate its aggressive stance on employment tax evasion, with several significant prosecutions and sentencings announced in the past two months. For tax professionals, these cases underscore the serious risks associated with a failure to properly withhold and remit payroll taxes.

Employment tax fraud is a top priority for the DOJ’s Tax Division and IRS Criminal Investigation (CI). The core of this offense is in the failure to turn over taxes withheld from employees’ wages, including income, Social Security, and Medicare taxes, to the government. This is not simply a tax debt; the law treats these withheld funds as trust funds belonging to the United States.

In July and August 2025, a number of high-profile cases have reaffirmed the government’s focus on this area:

• California Bay Area CEO: A CEO was sentenced for employment tax crimes, highlighting that C-suite executives are personally liable for these trust fund taxes.
• Charleroi Staffing Agency Owner: A business owner was sentenced to prison and ordered to pay over $3.6 million in restitution for a scheme that included failing to pay employment taxes.
• Florida Man: A Florida man pleaded guilty to his role in an “off-the-books” payroll scheme, a common method of employment tax fraud where wages are paid in cash to avoid withholding and reporting.
• Oregon Business Owner: This individual pleaded guilty to employment tax crimes, further demonstrating the nationwide scope of these enforcement efforts.

The consistent prosecution of these cases sends a clear message: the DOJ will seek prison sentences and substantial restitution for those who willfully evade employment tax obligations. The penalties are a direct consequence of the government viewing these funds not as a business’s money, but as funds stolen from both employees and the Treasury.

For business owners and the tax professionals who advise them, this heightened enforcement demands a proactive approach. Ensuring timely and accurate deposit of all withheld payroll taxes is an essential component of sound financial management and a critical shield against potential criminal liability.

Contact us for a consultation to learn more about how our firm can assist you with your client’s tax compliance and controversy needs, including matters related to employment tax obligations.