If your business has unpaid payroll taxes, act now. Missing one deposit does not automatically make the matter criminal. But repeatedly withholding taxes from employees and failing to send that money to the IRS can lead to growing penalties, personal liability and, in serious cases, a criminal investigation.

What happened in the recent case

On October 20, 2026, the Justice Department announced that a staffing company owner pleaded guilty to an employment tax conspiracy.

According to court documents, her companies failed to pay approximately $1.7 million in employment taxes between 2012 and 2024. The IRS assessed penalties against her personally in 2015, but the businesses did not begin complying.

Prosecutors said she later changed company names and locations, denied ownership in state filings and used business money for personal expenses. She faces a maximum sentence of five years in prison.

Why are payroll taxes treated so seriously

Federal income, Social Security and Medicare taxes withheld from employees’ paychecks are trust fund taxes. The business is holding that money for the government.

When those taxes are not paid, the IRS may assess the Trust Fund Recovery Penalty against people who controlled the company’s finances and willfully failed to pay. That may include an owner, officer, bookkeeper or another person with authority over which bills were paid.

An LLC or corporation may not protect those individuals. Closing the business or starting a new company also may not eliminate the liability. The IRS can pursue responsible people personally for the trust fund portion, plus applicable interest.

When can a civil tax problem become criminal

Most payroll tax cases remain civil. Criminal exposure becomes more likely when the IRS sees conduct suggesting that the failure was deliberate, such as:

• Continuing to miss deposits after receiving IRS notices
• Paying owners or other creditors while employment taxes remain unpaid
• Moving money among different companies or bank accounts
• Changing company names to avoid collection
• Concealing ownership or financial control
• Filing false returns or giving investigators false information
• Using withheld payroll taxes for personal expenses

A business owner should never move money, create another entity or change records in an attempt to hide the problem.

Penalties and interest keep growing

The IRS may impose failure to deposit penalties when employment tax deposits are late, insufficient or made incorrectly. Interest also continues to accrue while the balance remains unpaid.

The business should file every required Form 941 even if it cannot pay the entire balance. Unfiled returns create an additional problem and make it harder to determine the correct liability and develop a resolution plan.

Federal payroll tax resolution does not resolve New Jersey withholding or unemployment obligations. Those accounts, returns, penalties and collection risks must be reviewed separately.

What should you do if payroll taxes have not been paid

Do not wait for another quarter to pass. The immediate goals should be to stop the problem from growing and determine exactly what is owed.

1. Make every current payroll tax deposit on time.
2. File all missing federal and New Jersey returns, even if the full balance cannot be paid.
3. Identify every missing return and payment and obtain the relevant account transcripts.
4. Preserve payroll, banking, ownership and payment records.
5. Keep payroll tax funds separate from money used for operating expenses.
6. Review the facts with counsel before speaking with an IRS revenue officer or special agent.
7. Develop an appropriate filing, payment and resolution strategy for each taxing agency.

Current compliance comes first. A payment arrangement for older quarters generally will not provide lasting relief if the business continues missing new returns or deposits.

Coming forward does not guarantee that penalties will disappear or that the IRS will accept a particular resolution. But continuing the same conduct after learning about the problem can make the situation substantially worse.

Let Tomes Law Firm help you fix the problem now

If your New Jersey business has unpaid payroll taxes, you do not have to wait for a levy, personal assessment or criminal investigation.

Tomes Law Firm can help determine what was filed, identify the outstanding periods, protect your rights and develop a strategy for addressing the IRS and New Jersey before the problem grows.

We Solve Tax Problems. You Get Peace of Mind.

Visit tomeslaw.com to schedule a confidential consultation.

Official sources

• Justice Department  Michigan Woman Pleads Guilty to Employment Tax Conspiracy
• IRS  Employment Taxes and the Trust Fund Recovery Penalty
• IRS  Failure to Deposit Penalty

This article provides general information and is not legal advice. Every tax matter depends on its particular facts.