Awards & Recognition
Employment and payroll tax compliance is often a difficult issue for businesses. Unfortunately, even slight errors can translate to devastating fines and penalties. Issues like the failure to pay employment taxes, the misclassification of workers, or the non-filing or delinquent filing of employment tax forms can all give rise to an IRS audit, or, if the issue involves California payroll taxes, an employment tax audit by the California Employment Development Department (EDD). If there are indicators of tax fraud, the employer can even become the target of an IRS criminal investigation.
See our Employment Tax Law Q and A Library
Whether you are concerned about a criminal tax investigation, need assistance preparing for a payroll tax audit, or simply wish to review your company’s payroll tax procedures for accuracy and efficiency, rely on the California employment tax attorneys and CPAs at the Tax Law Office of David W. Klasing for award-winning support. Assisting C corporations, S corporations, LLCs, partnerships, sole proprietors, non-profit organizations, independent contractors, and freelancers, we have the insight and expertise your business needs. Contact us online today to schedule a reduced-rate employment tax consultation or call the Tax Law Office of David W. Klasing at (805) 617-4566. With tax offices conveniently located in San Jose, we provide efficient and responsive service to businesses throughout the county. Note consultations out of our San Jose office are by appointment only.
What Employment Taxes Do Employers Pay in California?
From small family-owned businesses to Fortune 500 companies, all types of employers in California are responsible for various federal employment taxes. Employers must withhold, in some cases match, and finally deposit with the federal government employment taxes including the following:
- Additional Medicare Tax (AMT) – Withheld from certain high-earning employees’ wages
- Federal Income Tax – Withheld from wages
- Federal Unemployment (FUTA) Tax – Paid by the employer only (not withheld from wages)
- Medicare Tax – Withheld from wages, matched by employer
- Self-Employment Tax – The rough equivalent of Medicare and Social Security Taxes for self-employed individuals
- Social Security Tax – Withheld from wages, matched by employer
In addition to meeting these and other IRS requirements, California employers are also responsible for state payroll taxes, which are administered by the EDD. California employment taxes include the following:
- California Personal Income Tax (PIT) – Withheld from wages
- Employment Training Tax (ETT) – Employer contribution
- State Disability Insurance (SDI) Tax – Withheld from wages
- Unemployment Insurance (UI) Tax – Employer contribution
Employment Tax Evasion and Payroll Tax Fraud Defense
The IRS is often more aggressive in pursuing payroll tax violations than income tax violations – and moreover, extremely harsh penalties can be imposed on employers who are found to be in willful or even inadvertent noncompliance.
See our Criminal Tax Law Q and A Library
Worker Classification Audits
Employers who misclassify employees as independent contractors have a high likelihood of being chosen for a worker classification audit – and being fined or criminally investigated. Be forewarned that workers who feel that they have been misclassified can report the employer to the IRS. Because of a recent California Supreme Court holding utilizing subcontractors is riskier than ever.
Payroll Tax Fraud: Criminal Penalties and the TFRP
Some employers attempt to delay or keep withheld employee wages, rather than remitting them to the IRS or EDD. At the federal level, this constitutes a violation of 26 U.S. Code § 6672 (failure to collect and pay over tax or attempt to evade or defeat tax). A trust fund recovery penalty (TFRP) may be imposed on a business owner or “responsible person,” who is personally liable for the penalty. The TFRP is equivalent to a full 100% of the amount due.
There can also be criminal penalties for payroll tax fraud, including fines and prison time. Under 26 U.S. Code § 7202 (willful failure to collect or pay over tax), the willful failure to collect and pay over employment taxes is a felony tax offense subject to maximum fines of $10,000 and/or a prison sentence of up to five years. The offender will also be held financially responsible for “the costs of prosecution,” as provided by the statute.
Federal and California Employment Tax Lawyers and CPAs in San Jose
Whether your California or federal employment tax matter involves fringe benefits, unemployment taxes, worker classification audits, EDD audits, payroll accounting methods, the Additional Medicare Tax, trust fund recovery penalties, accuracy-related penalties, seasonal workers, tax evasion charges, or related issues, the Tax Law Office of David W. Klasing possesses the knowledge and experience to help find a resolution. Our goal is to help you limit penalties, fight criminal allegations strategically, protect your legal rights during a tax audit or criminal investigation, and engage in effective tax planning for the future of your business.
To set up a reduced-rate consultation with our employment tax lawyers in San Jose, contact the Tax Law Office of David W. Klasing online, or call today at (805) 617-4566. Please note that all meetings at our San Jose tax office must be scheduled in advance.
Employment Tax FAQs for Businesses
If you have a payroll or employment tax question, you should contact our business tax attorneys for personalized, detailed guidance. However, the employment tax FAQs below may help to provide general information about your tax issue:
- How Does the IRS Develop an Employment Tax Fraud Case from the First Indication of Fraud to a Criminal Indictment?
- Is There an Option to Appeal the Trust Fund Recovery Penalty?
- What Are the Consequences of Failing to Pay Employment Taxes After Notice is Given?
- What Are the Most Common Employment Tax Evasion Schemes?
- What Are the Penalties for Failure to Pay Employment Taxes?
- What Happens if an Employer Continues to Incur New Payroll Tax Liabilities?
Note: If you have concerns about the privacy of our initial or subsequent communication and are unable to easily travel to our Irvine / Orange County Main Office, consider scheduling a GoToMeeting to safely and securely establish an initial or maintain an existing attorney client relationship. With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client. We are generally happy to travel to any of our appointment only satellite offices for a subsequent meeting in appropriate circumstances once a relationship is established via a signed engagement letter and the payment of an initial retainer or where enough retainer is available where a current client to cover the reasonable travel time and time required for the meeting.
Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company? Absolutely not! See our policies that address this issue here:
