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Friday, April 30, 2004

Another day, another bad day for tax protestors . . . and particularly Dick Simkanin who was just sentenced to seven years at the free federal resort without a beach. Simkanin was one of the posterboy for We The People's advertisements in USA Today of employers who refused to withhold their employees taxes. Simkanin will get out sometime in 2011.


Posted on Fri, Apr. 30, 2004

Defiant tax protester gets seven-year sentence

By Toni Heinzl

Star-Telegram Staff Writer


FORT WORTH - He calls himself a "Christian patriot" and a "political prisoner."

Convicted in January on 29 counts of violating U.S. income tax laws, Bedford businessman Richard Simkanin remained defiant in his anti-government stance at his sentencing Friday.


Simkanin, 59, told U.S. District Judge John McBryde that after spending thousands of hours studying federal tax laws, the Constitution and the Declaration of Independence, he concluded that he did not agree with the tax laws.


But McBryde had heard enough. Going beyond federal sentencing guidelines, McBryde sentenced Simkanin to seven years in prison and ordered him to pay $302,000 in restitution to the government.


In explaining the tough sentence, McBryde cited Simkanin's history of radical anti-government beliefs and his "contempt and disrespect" for the federal government and the federal courts.


"He and those who share his views have a cultlike belief that laws that are generally accepted by citizens of the United States are not applicable to them," McBryde said. "The defendant has entrenched himself in anti-government groups."


McBryde said Simkanin would continue to violate income tax laws. The judge recalled that Simkanin threatened to kill federal judges and that he surrendered his Texas driver's license but continued to drive with a home-made ID card.


On Jan. 7, a federal jury convicted Simkanin on 10 felony counts of failing to withhold about $139,000 in taxes from employees' wages at his company, Arrow Custom Plastics, and 15 felony counts of filing false tax refund claims for about $235,000.


He was also found guilty of four misdemeanor counts for failing to file individual income tax returns from 1998 to 2001. Simkanin had an estimated gross income of about $410,000 during these years, prosecutors said.


Arch McColl, the Dallas lawyer representing Simkanin, said he would appeal. McColl had asked for a sentence of 41 months at the low end of the federal guidelines. He described Simkanin as a non-conformist American in the tradition of Henry David Thoreau.


"He has a sincere, well thought-out position that is at odds with the government position," McColl said. "Reasonable people disagree about the tax laws. My client is an American citizen who, like Thoreau, walked to the beat of a different drummer."


But prosecutors pointed to Simkanin's long history of law-breaking, saying the last time he filed complete individual and corporate federal income tax returns dates back to the mid-1990s.


"We're going to have chaos in this country if individual citizens are allowed to decide unilaterally which laws are constitutional and which aren't," Assistant U.S. Attorney David Jarvis said. "The sentence for Mr. Simkanin was quite severe and appropriate."


Jarvis noted that Simkanin's defiance of the federal courts continued even after his conviction in January.


In a court judgment entered March 11, Simkanin and Arrow Custom Plastics' new owner, James Keffer, to whom he sold the business Feb. 17, agreed to file employment tax returns for the years 2000 through 2003 within 30 days. The judgment was issued by McBryde in a civil action filed by tax attorneys for the Justice Department in December to force Simkanin to comply with tax laws.


But the requested tax documents were not filed by the deadline, government lawyers said in a motion on April 21, asking McBryde to hold Simkanin and Keffer in contempt.


Simkanin rose to fame in tax protester circles -- and gained the attention of the IRS -- in March 2001 when he appeared in a full-page ad in USA Today with a group of like-minded citizens who announced their opposition to the federal income taxes. Later that year, prosecutors sent Simkanin a target letter notifying him that he was under investigation.


The group behind the ad, We the People, soon portrayed Simkanin as a martyr for the cause of freedom from IRS tyranny.


While under investigation, Simkanin posted a warning on his Web site that spoke of the "fury of a fire" that would consume his adversaries. He wrote to the Treasury secretary that he had repatriated himself from the United States to the "Republic of Texas." He vowed to ignore the laws of the United States.


While tax protesters from the We the People group crowded McBryde's courtroom during the trial, hardly a handful of supporters showed up for his sentencing.


Wearing an orange jail jumpsuit and a blue jacket, Simkanin invoked Scripture, James 5:4. In his view, the passage means that a laborer's wages are withheld through fraud.


His face showed an expression of defiance and sadness. He expressed no remorse for his actions but regretted the effect of his prison sentence on his severely ill wife, Carole.


"I do apologize to my wife for what she will go through in my absence," Simkanin said.


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Sunday, April 25, 2004

Another day, another bad day for tax protestors. Certainly, it's a bad day for Walt Maken who tried to avoid paying taxes by submitting a bogus W-4 which is a common strategy for TPs, but now one that will land them in prison.



FOR IMMEDIATE RELEASE
FRIDAY, APRIL 23, 2004
WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888

KETTERING BUSINESSMAN CONVICTED ON TAX CHARGES

Defendant Submitted False Withholding Statements To Prevent Payment Of Taxes

WASHINGTON D.C. - Eileen J. O’Connor, Assistant Attorney General for the Tax Division, United States Department of Justice, and Gregory G. Lockhart, United States Attorney for the Southern District of Ohio announced that, following a two-week trial, a federal jury in Dayton, Ohio today convicted Walter M. Maken of income tax evasion (26 U.S.C § 7201) and willful failure to file an income tax return (26 U.S.C § 7203). United States District Judge Herbert Walter Rice set sentencing for July 16, 2004.

The maximum penalty for the tax evasion charge is five years imprisonment followed by up to three years supervised release, a fine of $250,000, and liability for the costs of prosecution. The maximum penalty for the willful failure to file is one year of imprisonment followed by up to one year of supervised release, a fine of $100,000, and liability for the costs of prosecution.

According to the indictment and the evidence introduced at trial, Mr. Maken is a former employee of Joyce-Dayton Corporation and freelance photographer, who failed to timely file his federal income tax returns for the calendar years 1993 and 1994. In addition, he misled the IRS and concealed his income by submitting false W-4 forms to his employer, claiming he was exempt from income tax withholdings, and liquidated his retirement account without having any taxes withheld. Mr. Maken received about $70,000 in income in 1994 and had a tax due and owing of over $23,000. The government also introduced evidence that Mr. Maken had been involved with anti-tax protest organizations such as Our One Supreme Court and the Freedom Connection, both now defunct.

“Honest taxpayers deserve to know that people who commit tax crimes will be held accountable,” said Eileen J. O’Connor, Assistant Attorney General for the Tax Division.

“Tax crimes are not victimless crimes,” said U.S. Attorney Lockhart. “The honest taxpayers suffer whenever dishonest individuals fail to report fully their income and pay the taxes they owe to the U.S. Treasury.”

Assistant Attorney General O’Connor and United States Attorney Gregory G. Lockhart thanked Tax Division Trial Attorneys Richard M. Rolwing and Shawn T. Noud, who prosecuted the case. They also thanked the special agents of the Internal Revenue Service whose assistance was essential to the successful investigation and prosecution of the case.

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Tuesday, April 06, 2004

Another bunch of sham trust promoters plead guilty, and yet dozen of con artists are still how there peddling these dogs to the unwary. If anyone trying to sell you a "pure trust", "pure equity trust", "constitutional trust", "unincorporated business organization" or any other package that claims to make you free of income taxes, steer clear.
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FOR IMMEDIATE RELEASE
TUESDAY, APRIL 6, 2004
WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888

PROMOTERS OF SHAM TRUSTS PLEAD GUILTY TO TAX FRAUD CHARGES

WASHINGTON D.C. - Eileen J. O’Connor, Assistant Attorney General for the Tax Division, United States Department of Justice; Paul Warner, United States Attorney for the District of Utah; Nancy Jardini, Chief, Internal Revenue Service Criminal Investigation Division; and James H. Burrus, Jr., Special Agent-in-Charge, SLC Division, Federal Bureau of Investigation, announced today that at the federal courthouse in Salt Lake City, Utah, Michael Behunin pled guilty to a felony charge of conspiracy (18 U.S.C. §371) to commit mail and wire fraud and to defraud the Internal Revenue Service (IRS). In addition, they announced that a co-conspirator, David J. Orr, pled guilty yesterday to the same violation.

Messrs. Orr and Behunin were indicted in April 2003 - along with Todd R. Cannon, Lanny White, and Max Lloyd - for conspiring to commit mail and wire fraud and to defraud the Internal Revenue Service. They face a maximum potential sentence of five years imprisonment followed by up to three years supervised release, a $250,000 fine and liability for the costs of prosecution. As a condition of his plea agreement, Mr. Behunin, who is an attorney with an advanced degree in tax law, agreed to surrender his license to practice law. No sentencing dates were set.

“Putting your money in a sham trust does not exempt it from taxation,” said Assistant Attorney General Eileen J. O’Connor. “If someone tries to convince you to buy a trust as part of a scheme to avoid taxation while otherwise retaining control of your assets, you should seek advice from an honest tax professional who doesn’t stand to profit from the scheme.”

“At this time of the year, when residents of Utah are focusing on filing their state and federal tax returns, this case gives us a graphic reminder of the many abusive tax schemes for sale,” said U.S. Attorney Paul M. Warner. “The pleas taken in this case serve as timely reminders that these tax schemes are illegal and will be investigated and prosecuted to the fullest extent of the law. It is only fair to the vast majority of law-abiding citizens who pay an honest and fair tax that we aggressively pursue those who do not.”

“Promoting abusive trusts and tax schemes for the purpose of committing tax evasion isn't tax planning; it's criminal activity,” said Nancy Jardini, Chief, IRS Criminal Investigations. “We will continue to shut down fraudulent tax schemes and hold the promoters of these schemes accountable for their actions.”

“These schemes exemplify the worse elements of white collar crime -- the combination of greed, brains, and initiative,” said James H. Burrus, Jr., Special Agent in Charge, FBI, Salt Lake Division. “Those involved had the skills to make a positive difference in the Salt Lake City community, but used that talent to bilk investors and the U.S. Treasury. These pleas are the ending of a sad tale and send a message that men and women of the Department of Justice, the U.S. Attorney's Office, the IRS, and the FBI will not allow these schemes to flourish.”

In his plea agreement, Mr. Orr admitted that, starting as early as 1993, he had operated businesses under the names Advanta Strategies and World Contractual Services, which promoted fraudulent trust schemes designed to evade federal income taxes. In his plea agreement, Mr. Behunin also admitted participating in the conspiracy. Further, Mr. Orr admitted that, with his coconspirators, he sold the fraudulent trust scheme to approximately 300 clients for substantial fees. In seminars, promotional materials and opinion letters, they fraudulently misrepresented to clients that their tax liabilities could be lawfully reduced by placing businesses, homes, investments and other assets into a trust’s name. Further, Messrs. Orr and Behunin admitted fraudulently continuing to promote the trust scheme as legal, even after IRS audits disallowed the scheme. Mr. Orr admitted his actions, which included the filing of more than 2000 false and fraudulent federal income and trust tax returns, caused the losses of federal tax revenue totaling between $5 million and $10 million. Mr. Behunin admitted his actions caused the federal tax losses totaling between $950,000 and $1.5 million.

Mr. Orr also admitted that he and his co-conspirators fraudulently obtained between $5 million and $7 million from clients by misrepresenting the safety of and expected return on investments they marketed, as well as their own investment expertise. He further admitted causing client assets to be commingled and misappropriated.

Mr. Behunin also admitted to participating in a fraudulent railroad bond investment scheme, causing customers to lose between $350,000 and $500,000. He prepared documents containing false and fraudulent misrepresentations, in hopes the documents would increase the value of the railroad bonds. Mr. Behunin admitted he knew his co-conspirators were deceiving customers regarding the safety of the investment and the purported returns on this investment.

Tax Division trial attorneys Albert Kleiner, Nicholas Dickinson, and Kevin Downing prosecuted the case. Special agents of the Internal Revenue Service and Federal Bureau of Investigation provided essential assistance to the successful investigation and prosecution of the case.

On March 18, 2004, Todd Cannon and an unindicted conspirator, Lance Hatch, pled guilty to a conspiracy charge. Messrs. White and Lloyd are awaiting trial on the indictment. The charges contained in an indictment are only allegations. In the American justice system, a person is presumed innocent unless and until he or she is proven guilty in a court of law.

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04-214

Get the TRUTH about Paytriots and Tax Protestor Scams at http://quatloos.com

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Yet another case where sham trust promoters plead guilty. And yet many many con artists are still out there pitching these dogs to the unwary....

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FOR IMMEDIATE RELEASE
TUESDAY, APRIL 6, 2004
WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888


PROMOTERS OF SHAM TRUSTS PLEAD GUILTY TO TAX FRAUD CHARGES

WASHINGTON D.C. - Eileen J. O’Connor, Assistant Attorney General for the Tax Division, United States Department of Justice; Paul Warner, United States Attorney for the District of Utah; Nancy Jardini, Chief, Internal Revenue Service Criminal Investigation Division; and James H. Burrus, Jr., Special Agent-in-Charge, SLC Division, Federal Bureau of Investigation, announced today that at the federal courthouse in Salt Lake City, Utah, Michael Behunin pled guilty to a felony charge of conspiracy (18 U.S.C. §371) to commit mail and wire fraud and to defraud the Internal Revenue Service (IRS). In addition, they announced that a co-conspirator, David J. Orr, pled guilty yesterday to the same violation.

Messrs. Orr and Behunin were indicted in April 2003 - along with Todd R. Cannon, Lanny White, and Max Lloyd - for conspiring to commit mail and wire fraud and to defraud the Internal Revenue Service. They face a maximum potential sentence of five years imprisonment followed by up to three years supervised release, a $250,000 fine and liability for the costs of prosecution. As a condition of his plea agreement, Mr. Behunin, who is an attorney with an advanced degree in tax law, agreed to surrender his license to practice law. No sentencing dates were set.

“Putting your money in a sham trust does not exempt it from taxation,” said Assistant Attorney General Eileen J. O’Connor. “If someone tries to convince you to buy a trust as part of a scheme to avoid taxation while otherwise retaining control of your assets, you should seek advice from an honest tax professional who doesn’t stand to profit from the scheme.”

“At this time of the year, when residents of Utah are focusing on filing their state and federal tax returns, this case gives us a graphic reminder of the many abusive tax schemes for sale,” said U.S. Attorney Paul M. Warner. “The pleas taken in this case serve as timely reminders that these tax schemes are illegal and will be investigated and prosecuted to the fullest extent of the law. It is only fair to the vast majority of law-abiding citizens who pay an honest and fair tax that we aggressively pursue those who do not.”

“Promoting abusive trusts and tax schemes for the purpose of committing tax evasion isn't tax planning; it's criminal activity,” said Nancy Jardini, Chief, IRS Criminal Investigations. “We will continue to shut down fraudulent tax schemes and hold the promoters of these schemes accountable for their actions.”

“These schemes exemplify the worse elements of white collar crime -- the combination of greed, brains, and initiative,” said James H. Burrus, Jr., Special Agent in Charge, FBI, Salt Lake Division. “Those involved had the skills to make a positive difference in the Salt Lake City community, but used that talent to bilk investors and the U.S. Treasury. These pleas are the ending of a sad tale and send a message that men and women of the Department of Justice, the U.S. Attorney's Office, the IRS, and the FBI will not allow these schemes to flourish.”

In his plea agreement, Mr. Orr admitted that, starting as early as 1993, he had operated businesses under the names Advanta Strategies and World Contractual Services, which promoted fraudulent trust schemes designed to evade federal income taxes. In his plea agreement, Mr. Behunin also admitted participating in the conspiracy. Further, Mr. Orr admitted that, with his coconspirators, he sold the fraudulent trust scheme to approximately 300 clients for substantial fees. In seminars, promotional materials and opinion letters, they fraudulently misrepresented to clients that their tax liabilities could be lawfully reduced by placing businesses, homes, investments and other assets into a trust’s name. Further, Messrs. Orr and Behunin admitted fraudulently continuing to promote the trust scheme as legal, even after IRS audits disallowed the scheme. Mr. Orr admitted his actions, which included the filing of more than 2000 false and fraudulent federal income and trust tax returns, caused the losses of federal tax revenue totaling between $5 million and $10 million. Mr. Behunin admitted his actions caused the federal tax losses totaling between $950,000 and $1.5 million.

Mr. Orr also admitted that he and his co-conspirators fraudulently obtained between $5 million and $7 million from clients by misrepresenting the safety of and expected return on investments they marketed, as well as their own investment expertise. He further admitted causing client assets to be commingled and misappropriated.

Mr. Behunin also admitted to participating in a fraudulent railroad bond investment scheme, causing customers to lose between $350,000 and $500,000. He prepared documents containing false and fraudulent misrepresentations, in hopes the documents would increase the value of the railroad bonds. Mr. Behunin admitted he knew his co-conspirators were deceiving customers regarding the safety of the investment and the purported returns on this investment.

Tax Division trial attorneys Albert Kleiner, Nicholas Dickinson, and Kevin Downing prosecuted the case. Special agents of the Internal Revenue Service and Federal Bureau of Investigation provided essential assistance to the successful investigation and prosecution of the case.

On March 18, 2004, Todd Cannon and an unindicted conspirator, Lance Hatch, pled guilty to a conspiracy charge. Messrs. White and Lloyd are awaiting trial on the indictment. The charges contained in an indictment are only allegations. In the American justice system, a person is presumed innocent unless and until he or she is proven guilty in a court of law.

###

04-214

Get the TRUTH about Paytriots and Tax Protestor Scams at http://quatloos.com

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Monday, April 05, 2004

Looks like the IRS is getting wise to the games, such as the 861 Scheme being played at the Employer level.


IRS Warns Businesses, Individuals to Watch for Questionable Employment Tax Practices
IR-2004-47, April 5, 2004

WASHINGTON — The Internal Revenue Service issued a consumer alert today for eight schemes where federal employment taxes are not properly withheld or paid by employers from their employees’ paychecks. The IRS alert to business owners and other taxpayers follows a string of recent convictions and court rulings involving employment tax schemes.

“Failure to pay employment taxes is stealing from the employees of the business,” said IRS Commissioner Mark W. Everson. “The IRS pursues business owners who don’t follow the law, and those who embrace these schemes face civil or criminal sanctions.”

There are many reasons employers don’t withhold or pay employment taxes. For some, it may be an attempt to use the government as a bank to 'borrow the money for a short while' with good intentions to pay it back later. For others, it may be a situation where an employer collects the taxes and elects to keep it during a period of financial difficulty rather than pay it to the IRS. For a small number, it involves philosophical differences with the tax law of the United States that courts consistently reject. Regardless of the reason, federal law requires employment tax withholding and payment by employers.

Employment taxes consist of federal income tax withholding along with Social Security and Medicare taxes and unemployment taxes. Also, many states have withholding requirements for various employment related taxes, such as contributions to a worker’s compensation fund. Improper reporting or payment of employment taxes affects the ease with which employees can claim future benefits from these programs.

The IRS takes a variety of steps to combat employment tax non-compliance. The agency has a number of civil actions it can take like audits and filing tax liens against property the taxpayer owns. In addition to civil actions, IRS Criminal Investigation investigates and refers for prosecution individuals and businesses that have willfully attempted to avoid filing and paying employment taxes. These efforts have led to significant criminal convictions resulting in incarceration and fines.

During the past three years, 117 individuals have been sentenced to confinement in a federal prison, a halfway house or home detention for criminal violations related to employment taxes. Approximately 77 percent of the persons sentenced for evading employment taxes served an average of 17 months confinement and were ordered to make restitution to the government for the taxes evaded, plus interest and penalties.

Recent examples of employment tax prosecutions can be found at IRS.gov. See the link for Significant Employment Tax Case Summaries, below.

The IRS urges all businesses to resist the temptation to become involved in or victimized by unlawful activities. The eight most common types of employment tax non-compliance include:

* Pyramiding. "Pyramiding" of employment taxes is a fraudulent practice where a business withholds taxes from its employees but intentionally fails to remit them to the IRS. An often cause is a lack of profit or capital for operating costs, so the business owner uses the trust funds to pay other liabilities. The quarterly employment tax liabilities accumulate (or “pyramid”) until the employer has little hope of catching up. Businesses involved in pyramiding frequently shut down or file for bankruptcy and then start a new business under a different name starting the cycle over.

* Unreliable Third Party Payers. There are two primary categories of third party payers – Payroll Service Providers and Professional Employer Organizations. Payroll Service Providers typically perform services for employers such as filing employment tax returns and making employment tax payments. Professional Employer Organizations offer employee leasing meaning that they handle administrative, personnel, and payroll accounting functions for employees who have been leased to other companies that use their services. Many of these companies provide outstanding services to employers. Unfortunately, in some instances, companies of both types of services have failed to pay over to the IRS the collected employment taxes. When these employment service companies dissolve, millions in employment taxes can be left unpaid. Employers are urged to exercise due diligence in selecting and monitoring a third party payer. For example, when choosing a third party payer, employers should look for one that is reputable and uses the Electronic Federal Tax Payment System (EFTPS). This allows the business owner to verify payments made on their behalf. Also, an employer should never allow their address of record with the IRS be changed to that of the third party payer.

* Frivolous Arguments. Unscrupulous individuals and promoters have used a variety of false or misleading arguments for not paying employment taxes. These schemes are based on an incorrect interpretation of “Section 861” and other parts of the tax law and have been refuted in court. One variation of this scheme involves the improper use of Form 941c, Supporting Statement to Correct Information on Form 941, to attempt to get a refund of previously paid employment taxes. Recent court cases have resulted in criminal convictions of promoters. Employer participants could also be held responsible for back payments of employment taxes, plus penalties and interest.

* Offshore Employee Leasing. This scheme, which was designated as a Listed Transaction by the Service in 2003, misuses the otherwise legal business practice of employee leasing. Under the typical promotion, an individual taxpayer supposedly resigns from his or her current employer or professional corporation and signs an employment contract with an offshore employee leasing company. The offshore company indirectly leases the individual’s services back to the original employer using a domestic leasing company as an intermediary. The individual performs the same services before and after entering into the leasing arrangement. While the total amount paid for the individual’s services stays the same or increases, most of the funds are sent offshore as “deferred” compensation. The “deferred” compensation is then paid to the individual as a “loan” or ends up in an account under the individual’s control. Promoters of these arrangements improperly claim that neither employment taxes nor income taxes are owed on the “deferred” compensation. Because it is a Listed Transaction those who use the scheme are required to disclose their participation on current tax returns, and will be liable for the unpaid tax and subject to penalties and interest. Civil and criminal actions are being taken against promoters and participants in offshore leasing schemes – one promoter was convicted of defrauding the U.S. and sentenced to 70 months imprisonment, two other promoters have been ordered by the courts to stop marketing the scheme and a San Diego doctor plead guilty to tax evasion and is awaiting sentencing.

* Misclassifying worker status. Sometimes employers incorrectly treat employees as independent contractors to avoid paying employment taxes. Generally if the payer has the right to control what work will be done and how it will be done, the worker is an employee. Employers who misclassify employees as independent contractors (and are not eligible for relief under Section 530 of the Revenue Act of 1978) will be liable for the employment taxes on wages paid to the misclassified worker and subject to penalties.

* Paying Employees in Cash. Paying employees in whole or partially in cash is a common method of evading income and employment taxes. There is nothing wrong with compensating an employee in cash, but employment taxes are owed regardless of how the employees are paid. And the IRS will build its case using all available information even if there are no payroll records or checks.

* Filing False Payroll Tax Returns or Failing to File Payroll Tax Returns. Preparing false payroll tax returns intentionally understating the amount of wages on which taxes are owed or failing to file employment tax returns are methods commonly used to evade employment taxes.

* S Corporation Officers Compensation Treated as Corporate Distributions. In an effort to avoid employment taxes, some S Corporations are improperly treating officer compensation as a corporate distribution instead of wages or salary. By law, officers are employees of the corporation for employment tax purposes and compensation they receive for their services is subject to employment taxes.

The IRS encourages employees to report any concerns that an employer is failing to properly withhold and pay federal income and employment taxes. Taxpayers can contact the IRS at 1-800-829-1040 or report suspected tax fraud by calling 1-800-829-0433.

Employers must report employment taxes withheld from their employees on Form 941, Employer’s Quarterly Federal Tax Return. Employers are also responsible for filing Form 940, Employer’s Annual Federal Unemployment Tax Return. Payment of employment taxes must be made to an authorized bank or financial institution according to federal tax deposit requirements. Employers may also pay these taxes electronically.
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