TAX FORM 941 TAX FRAUD

Tax Form 941 Tax Fraud

Tax Form 941: Tax Fraud

This paper is based on a case study of tax fraud. The firm called 'Dirty Cleaning Care Inc., is facing probe into its tax delinquency - and now the owner of the firm requires to issue a memo regarding his potential tax evasions and the recommendations that could bring back the firm's lost ground, in accordance with the regulations outlined in Tax Form 941.

Memo

The Accounts Department

Dirty Cleaning Care Inc

ABC Road

New York

This is to inform all the concerned staff members that the company is currently being monitored for the tax delinquency in accordance with the requirement of Tax Form 941.

IRS Form 941 is the Employer's Quarterly Federal Tax Return. All employers must withhold federal taxes from employees' compensation. These taxes include federal income tax, Social Security tax and Medicare tax. Those payments by the employer (Dirty Cleaning Care, Inc. in this case) are credited to employees' tax liabilities and reported to them (as well as to the IRS) on the annual W-2. Employers must also pay their portion of Social Security and Medicare taxes which are not withheld from employees. The IRS Form 941 is the vehicle for reporting and paying these taxes to the government.

Employers (Dirty Cleaning Care Inc. in this case) who withhold taxes as required by law must complete IRS Form 941. The specific amounts reported by the employer (Dirty Cleaning Care, Inc. in this case) on this form include the following: all wages they have paid; federal tax withheld by the firm on behalf of employees; both your employees' and your share of Social Security and Medicare taxes; any adjustments to the current quarter's Social Security and Medicare taxes for fractions of cents, sick pay, tips and group term-life insurance; advanced earned income tax credit (EIC) payments; and credit for COBRA premium assistance payments (Podgor, 1993).

According to the Internal Revenue Service §7201 contains one distinct criminal offense “attempted evasion of any tax,” which can be committed by evading the assessment of a tax or by evading the payment of that tax. Nevertheless, §7201 has been described as the “capstone of a system of sanctions that were intended to induce prompt and forthright fulfillment of every duty under the income tax law and to provide a penalty suitable to every degree of delinquency.” (www.irs.gov)

Most commonly, a taxpayer may attempt to evade or defeat the payment of a tax liability by filing a fraudulent tax return that omits or understates taxable income and/or claims deductions to which the taxpayer is not entitled. This falls under the category evasion of assessment. Evasion of payment occurs when a taxpayer attempts to evade payment of her tax liability altogether (Internal Revenue Service, Data Book 2002). Evasion of payment occurs only after the existence of a tax liability has been established. Establishment of a tax liability generally occurs in one of three ways: the taxpayer reports the amount of the taxes owed; the Internal Revenue Service (IRS) assesses the amount ...