ATLANTA – The IRS warns employees and employers about payroll tax fraud, red flags, and serious federal penalties.
Release:
ATLANTA – Employees routinely see federal income tax, Social Security, and Medicare withholdings on their paychecks. Unfortunately, in some cases, employers fail to remit these funds to the IRS and instead use them for other purposes.
Employment taxes make up nearly 60% of all U.S. tax revenue and include both the employer’s share of Social Security and Medicare taxes, as well as the amounts withheld from employees for federal income tax, Social Security, and Medicare. Together, these withheld amounts are commonly referred to as Trust Fund Taxes, reflecting the employer’s responsibility to safeguard and remit funds that ultimately belong to workers and the American public. The funds are required to be paid to the IRS on a quarterly basis.
Under 26 U.S.C. § 7202, employers or other “responsible persons” who do not turn over withheld payroll taxes commit a federal trust‑fund violation, also known as employment tax fraud. A responsible person is anyone with the authority to collect, account for, and pay trust‑fund taxes, regardless of whether that authority is exercised.
“When employers withhold payroll taxes, they are entrusted with funds that belong to their employees and to the American public,” said Special Agent in Charge Demetrius Hardeman of IRS Criminal Investigation, Atlanta Field Office. “Employers who fail to remit employment taxes not only deprive their employees and the U.S. Treasury of funds that rightfully belong to them, they also gain an unfair competitive advantage over businesses that play by the rules.”
IRS‑CI maintains strong conviction rates for employment tax fraud, with recent averages between 95.6% and 99.1%, and typical prison sentences ranging from 17 to 22 months.
Employees who are concerned that their tax withholdings may not be properly remitted to the IRS should watch for common red flags. These red flags include paychecks issued without appropriate withholding, cash payments made “under the table,” missing or inaccurate W‑2s, or unusual delays in receiving them. Sudden changes to pay stubs, withholding amounts, or payroll schedules may also signal a problem. Additionally, IRS notices that do not align with wages reported by the employer can indicate potential withholding issues.
Employees can review their tax information through the IRS Online Account and verify their earnings history through the Social Security Administration’s online resources. While employees cannot directly confirm whether withholdings were remitted, these tools can help identify inconsistencies.
Employers and employees may report suspected payroll tax fraud by submitting Form 3939‑A (IRS Fraud Referral Form) or by contacting the IRS‑CI Atlanta Field Office at atlantafieldoffice@ci.irs.gov.
A recent case of employment tax fraud involves Benjamin Thomas, III of Hammond, La., who was sentenced on Oct. 1, 2025, to 48 months in federal prison for five counts of failing to truthfully account for and pay over federal trust fund taxes. He was also ordered to pay restitution of $1.2 million to the IRS. For the five specific time periods during the first three quarters of 2017 and the first two quarters of 2018, Thomas failed to truthfully account for and pay over more than $970,000 in trust funds. Thomas owned, operated, and controlled a company called Lighthouse Community Care, Inc., a mental health services clinic based in Baton Rouge, Louisiana.
