If there is no dispute over whether you are an actual employee, then I
can see no reason why your employer or his attorney would assume that
THEY are not responsible for your employment taxes.
Is your employer's attorney actually disputing IRS tax law by
proposing that his client (your employer) can get away with NOT paying
his share of your employment taxes?
Is the employer and his attorney proposing that YOU are responsible
for paying the employer's share of employment tax that your employer
neglected to pay on your behalf?
To be honest, I would report your employer to the IRS immediately. In
any case, you are not responsible for educating your employer and his
attorney about tax law!
Before you proceed, please be reminded of the disclaimer that
accompanies the GA service.
"Information provided via the Services is not intended to substitute
for informed professional medical, psychiatric, psychological, tax,
legal, investment, accounting, or other professional advice."
As an introduction, please read the following:
"IRS Warns Businesses, Individuals to Watch for Questionable
Employment Tax Practices." IR-2004-47, April 5, 2004
Please make SURE your employer and his attorney read this over!
Excerpts from "Statement of Steven T. Miller, Commissioner, Tax-Exempt
and Government Entities Division, Internal Revenue Service. Testimony
Before the Subcommittee on Oversight of the House Committee on Ways
and Means. May 25, 2006
II. Applicable Law
Overview of Employment Tax Requirements
"In general, employers are required to pay employment taxes on wages,
and to report wages and certain other payments to the IRS. Federal
employment taxes include three components: (i) federal income tax
withholding, (ii) social security, and Medicare taxes (the Federal
Insurance Contributions Act "FICA" taxes), and (iii) the Federal
Unemployment Tax Act (FUTA) tax. Employers are required to make
deposits of employment taxes on a daily, semi-weekly, monthly or
quarterly schedule, depending upon the amount of tax they accumulate
Determining Liability for Tax
"The first step in evaluating liability for federal employment taxes
is to determine whether a worker is an employee or an independent
"Employers are generally liable for employment taxes, and the
associated withholding, reporting and deposits, on the wages they pay
"Employers are also required to withhold and pay the employee portion
of social security taxes (currently 6.2 percent of wages up to the
maximum wage base, which is $94,200 for 2006) and Medicare taxes
(currently 1.45 percent of all wages) from payments of wages, and to
pay the equivalent employer portion of social security and Medicare
taxes with respect to wages paid to the employees.
** If the employer fails to withhold the proper amount of income tax
or the employee portion of social security or Medicare taxes from
wages paid to the employee, ** the employer remains liable for such
Personal liability for employment taxes
"Section 6672(a) of the Code imposes a liability equal to the amount
of unpaid "trust fund taxes" upon any person responsible for
collecting, accounting for or paying over such taxes who willfully
fails to do so. "Trust fund taxes" include income tax withholding and
the employee portion of social security and Medicare taxes."
PLEASE PRINT OFF THIS ENTIRE PAGE FOR YOUR EMPLOYER'S ATTORNEY from
the Criminal Tax Manual.
I don't see that you need to go any further in trying to convince or
persuade the attorney or the employere concerning your employer's
responsibility. Let the IRS do so! If your employer wants to continue
to badger you, tell him to take it up with the IRS and provide him
with the phone number!
9.00 WILLFUL FAILURE TO COLLECT OR PAY OVER TAX
Read and print all.....
Also see "United States Court of Appeals For the First Circuit. No. 01-2357
ITAMAR LUBETZKY, Plaintiff, Appellant, v. UNITED STATES OF AMERICA,
"Employers are required to deduct from employee wages--and turn over
to the Internal Revenue Service--social security, Medicare and federal
income taxes. Although the primary liability for failing to do so is
the employer's, a penalty for such a failure equal to the unpaid tax
can be collected from "[a]ny person" who was "required" but
"willfully" failed to pay over the withheld taxes. I.R.C. § 6672
(2000); Slodov v. United States, 436
U.S. 238, 250 (1978). Such persons are described in the case law as
"responsible persons" and a body of decisions has refined the concept,
albeit imperfectly. See Mertens, Law of Federal Income Taxation §§
55:107-:113 (1997 & 2004 Supp.)."
Please review the following examples of Employment Tax Enforcement
taken from the IRS website.
See what happened to employers who refused to collect employment taxes
from their employees, or collected the tax but neglected to fork the
money over to the IRS!
** NOTE that in each of the following cases, the employer was
responsible for uncollected employment taxes - NOT the employee!
From "Examples of Employment Tax Enforcement"
Man Sentenced In Employment Tax Evasion Case
"On July 7, 2005, in Cincinnati, OH, Eric Nystrom was sentenced to
eight months in prison followed by three years of supervised release,
and ordered to pay restitution in an amount of $311,323 as well as a
$2,500 fine for willfully attempting to evade or defeat the payment of
federal employment taxes to the Internal Revenue Service.
* Nystrom previously pleaded guilty to one count of income tax evasion
for willfully evading the payment of approximately $57,846 in federal
employment taxes to the IRS that was due on $378,084 of wages that
were paid to employees during the fourth quarter of the year ending
December 31, 2001.
* Nystrom failed to withhold the federal income taxes for wages paid
to his employees
* and failed to withhold the employer?s portion of the federal employment taxes.
As a result, Nystrom evaded $311,325.52 in federal employment taxes.
Nystrom also failed to pay unemployment insurance compensation taxes
due to the State of Ohio on wages paid to his employees and failed to
report the true number of employees to the Ohio Bureau of Worker?s
Attorney Sentenced for Evaded Employment and Personal Taxes
"On December 16, 2004, in Cleveland, OH, Mark S. Colucci, an attorney,
was sentenced to 18 months in prison to be followed by two years of
supervised release and ordered to pay an assessment of $125. Colucci
pleaded guilty on October 12, 2004, to willfully failing to account
for and pay over federal income and social security taxes withheld
from the wages of his employees and willfully failing to pay personal
In his plea agreement, Colucci admitted that
* he knowingly and willfully failed to pay the entire amount of the
employees' and employer's share of employment taxes owing with respect
to his employees' wages and salaries, although he knew he was
required to file such returns and to remit such taxes to the IRS.
Beginning with the quarter ending September 1996 through the quarter
ending June 2001, Colucci failed to pay over to the IRS $29,727 in
employment taxes. Colucci also admitted to knowingly and willfully
failing to pay personal income taxes in the amount of $291,149 for the
calendar years 1997 through 2001."
Kansas Man Sentenced for Willfully Failing to Pay Federal Employment Taxes
"On December 7, 2004, in Topeka, KS, David G. Pflum was sentenced to
30 months in federal prison, without parole, to be followed by two
years of supervised release and ordered to pay a $6,000 fine. Pflum
was convicted of eight counts of
* willfully failing to collect and pay federal employment taxes and
three counts of willfully failing to file federal individual income
According to evidence presented at trial, Pflum, owner of Coil Springs
Specialties, paid approximately $363,435 in wages from January 1,
1998, through December 31, 1999, and
* willfully failed to collect and pay to the IRS approximately
$138,853 in federal employment taxes.
Pflum received net income of $264,000 for tax year 1997, net income of
$488,000 for tax year 1998, and net income of $393,000 for tax year
1999 and willfully failed to file federal individual income tax
returns for 1997, 1998, and 1999 with the Internal Revenue Service."
Arkansas Resident Sentenced for Failure to File
"On March 31, 2005, in Little Rock, AR, Gary Ingle was sentenced to 18
months (1 month incarceration and 17 months home detention) and
ordered to pay $520,760 restitution to the Internal Revenue Service.
Ingle owned and operated Environmental Data Services, Inc. (EDSI).
* He willfully failed to collect and pay over employment taxes for his
employees to the IRS.
Ingle instead used these funds for personal living expenses and the
purchase of personal assets. Ingle pleaded guilty on March 22, 2004,
to violations of failing to collect or pay over employment taxes from
1997 through 2000 and failure to file personal income taxes for tax
years 1997 through 2000. Ingle was ordered to pay the restitution
before his supervised release ends in three years after his
incarceration. Ingle was also ordered to service 50 hours of
community service. Ingle admitted that his actions caused a tax loss
to the government of $463,000 in employment taxes and $57,760 in
personal income taxes."
Businessman Sentenced to Seven Years in Prison
"On April 30, 2004, in Dallas, Texas, Richard M. Simkanin, former
owner of Arrow Custom Plastics, was sentenced to seven years in prison
and ordered to pay over $300,000 in restitution. Simkanin was
convicted on January 29, 2004, on 29 counts of various tax violations.
* According to evidence presented in court, Simkanin refused to
withhold taxes from his employees? paychecks despite warnings from
Simkanin?s bookkeeper and two members of an accounting firm who told
Simkanin it was illegal to refuse to collect employment taxes.
By not withholding taxes during the period 2000 through 2002, Simkanin
was able to retain over $175,000 in taxes lawfully due to the IRS.
Testimony at trial indicated Simkanin also filed a $235,000 false
claim for a refund in taxes already collected for 1997 through 1999."
"Employer is Liable to IRS for Certain Unpaid Employment Taxes; Court
Holds IRS Properly Classified Worker as an Employee. (Nu-Look Design,
Inc. v. Commissioner of IRS, 3rd Circuit Court of Appeals, January 26,
2004) The 3rd Circuit Court of Appeals upheld IRS's classification of
a worker as an employee for Social Security (FICA) and Federal
Unemployment Taxes withholding based on its finding that Nu-Look
Design (employer) lacked a reasonable basis for not treating the
worker as an employee."
From "EXAMPLES OF CRIMINAL PROSECUTIONS, CIVIL INJUNCTION CASES, AND
PARALLEL CIVIL AND CRIMINAL PROCEEDINGS."
* "Al Thompson of Shasta Lake, California, doing business as Cencal
Sales Co., failed to withhold federal taxes from employees' wages, pay
employment and unemployment taxes, and file tax returns and W-2 wage
Thompson has been described by the New York Times as an "advocate of
the notion that American companies and their workers do not have to
pay income taxes." He appeared on the television program "60 Minutes
II," where he asserted that wages are not taxable and that employers
therefore need not withhold federal taxes from their employees? wages.
In September 2003, the court entered a preliminary injunction,
ordering him to withhold and pay these taxes and to file returns and
W-2 statements. In November 2004, Thompson was indicted, along with
co-defendant, Joseph Bannister, for conspiring to defraud IRS, filing
false returns, and willful failure to turn over $176,000 in employment
taxes. In February 2005, he was convicted of 13 counts of filing
false returns and failing to turn over employment taxes."
Although the following reference pertains to a case involving the
liabilities of individuals in a partnership, your employer's attorney
should still find it relevant to your employer's responsbility to pay
your portion of employment tax:
From UNITED STATES v. GALLETTI ET AL.
"Here, the liability arose from the Partnership?s failure to comply
with §3402(a)(1)?s requirement that an "employer [paying] wages"
deduct and withhold employment taxes. And §3403 makes clear that the
"employer" that fails to withhold and submit the requisite employment
taxes is the "liable" taxpayer.
In another twist - look at the employer's responsibility when the
payroll service screws up!
"Employers are Still Responsible for Payroll Taxes Even if They Use a
"A company had used a payroll service to process their payroll, file
the company's payroll tax returns and make payroll tax deposits. The
owner of the payroll company filed phony payroll tax returns and stole
the tax deposits.
A U.S. district court in New Jersey ruled that the company is liable
not only for the unpaid payroll taxes, but for interest and penalties
on those unpaid taxes (Pediatric Affiliates, D.C., N.J.). Although the
company can sue the payroll service company, it will be of little use
because the payroll service filed for bankruptcy.
This case provides a great example of why business owners must stay on
top of their payroll tax responsibilities, even if they are
outsourcing that function."
Your employer might be interested in reading this brief overview about
"A Primer on Payroll Taxes for the Small Business Owner."
"What can be done if an employer will not withhold income taxes,
social security, and Medicare from my pay?"
"Generally, in situations such as this, the employer is not
considering you to be an employee. Rather, you are being treated as an
independent contractor (self-employed person). If you cannot resolve
this matter with your employer, and if you feel that an
employer-employee relationship exists, you should submit a Form SS-8
(PDF), Determination of Employee Work Status for Purposes of Federal
Employment Taxes and Income Tax Withholding. The factors used to
determine if an employer-employee relationship exists are covered in
Chapter 2 of Publication 15-A (PDF), Employer's Supplemental Tax
"If your status as an employee is not at issue, it may be that you are
in a category of employment whose earnings are not defined as wages
under U.S. federal tax and social security law. Find out from your
employer the reason that social security and Medicare taxes and income
taxes are not being withheld from your pay. If you have further
questions, contact the IRS at 800-829-1040 or visit an IRS walk-in
office for assistance."
* Form SS-8 (PDF), Determination of Employee Work Status for Purposes of
Federal Employment Taxes and Income Tax Withholding
* Publication 15-A (PDF), Employer's Supplemental Tax Guide
* Publication 1779 (PDF), Independent Contractor or Employee
I hope this information is helpful as you go foward. Best of luck!
employer liability for employment tax
court cases involving employment tax
employer is liable for employment taxes if fails to withhold
employer responsible for unpaid employee taxes
employer fails to withhold employment tax
Court AND employer is liable for employment taxes if fails to withhold
responsibility for unpaid employment tax AND legal OR court
Slodov v. United States