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IRS Enforcement Against “Ghost Employers”! [Video]

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Small Business Tax Tips And Advice

IRS Enforcement Against “Ghost Employers”! #business #businessowner #irs

A warning for employers: action is being taken by the IRS against so-called “ghost employers”. A ghost employer is someone who pays their employees but does so in a way that prevents taxes from being paid to the government. This can happen in a variety of manners, and IRS enforcement has ramped up against it.

Ghost employers evade their tax obligation by paying their employees cash to prevent a paper trail. They may also withhold taxes from their employee’s wages, but then proceed to never pay this withheld money to the federal government, instead, opting to keep the money for themselves.

This practice of employer fraud has a significant impact on the tax gap—the amount of taxes the government is yet to collect from Americans from its total estimated tax owed by the nation. With the current tax gap projected to be at “$688 billion”, employers evading their employment tax obligations are a large part of the problem. What makes it difficult for the IRS to catch bad actors in this scheme is its inherent secrecy. Since ghost employers avoid all means of a paper trail, it is not easy for the government to track them down and hold them accountable.

Still, though enforcement against ghost employers has “resulted in limited success” so far, about “$43.6 million in total restitution” has been collected from those prosecuted for employment tax fraud. Recent recommendations and an increased budget from the Inflation Reduction Act could see IRS action ramp up once again.

Employers participating in ghost employer schemes should resolve to being in compliance with IRS regulations and paying their fair share of taxes. If you are not sure of how to mend your current practices, reach out to XQ CPA for guidance. We believe that compliance is vital to your business’s function, and we would love to help you.

Phone: 832-295-3353
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Sources:
https://www.journalofaccountancy.com/news/2024/apr/irs-has-mixed-results-from-ghost-employer-enforcement-efforts.html
https://www.irs.gov/newsroom/irs-updates-tax-gap-projections-for-2020-2021-projected-annual-gap-rises-to-688-billion

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