As an employee, you are required to tell the IRS how many dependents, or tax exemptions, you provide for in your household. You offer this information to your employer on IRS Form W-4. Your employer then bases the amount of federal taxes withheld from your pay on the number of dependents you reported. Generally, the more dependents you have, the fewer taxes you will pay. All employers are required to keep such information on record during, and for 3 years following, your association with them.
Sometimes when an employee faces immediate financial difficulties, he or she may inflate the number of exemptions, hoping to correct the matter when financial conditions improve. Don’t make this mistake.
Why? The IRS views deliberate overstatement of exemptions as an attempt to evade taxes.
Thus, you can be prosecuted for fraud. And once the IRS begins investigating you, chances are, the IRS won’t stop at just one year or just one place of employment. The chances are that Uncle Sam will look at several years of your tax returns and visit all involved employers to determine whether or not you have committed other Internal Revenue Code violations. Also, because you have not paid in to Uncle Sam the required amount of taxes for the year, you will most likely owe substantially when you file the year’s individual tax return. That means you will be liable to render to the government a lump sum that will be assessed interest and possibly penalties as well.
And if you are an employer, don’t ignore an employee who you believe to be reporting an unusually high number of dependents.
If the IRS suspects you of participating in this type of fraudulent withholding scheme, the IRS will launch an investigation into your records, including several years of tax returns, W-4s for your employees, and your quarterly tax returns. In addition to the risk raised by examination of your books, you can be prosecuted for aiding and abetting fraudulent activities.
If the IRS notifies you that you are being investigated for fraudulent withholding, contact our team of professionals at Law Offices of Christy Lee, P.C. You need experienced counsel concerning your rights and obligations to the IRS. Our tax boutique will review the facts of your case to determine the most optimum path to resolution. We will determine whether you deliberately acted in bad faith in reporting your exemptions or in allowing an employee to report an inflated number, and we will assess issues such as the statute of limitations as pertinent to the matter. We will then appear on your behalf before the IRS and in court as necessary.
Don’t risk your financial future when it comes to fraudulent withholding. Call Law Offices of Christy Lee, P.C., to find out your rights and responsibilities concerning all your tax issues.