What's the difference between payroll tax evasion and failure to pay?

Evasion requires willful intent to defraud — actively concealing income or assets to avoid paying. Simple failure to pay, while still a violation, is generally treated as a civil matter unless the IRS proves willful intent.

What are the penalties for payroll tax evasion?

Criminal penalties include up to 5 years in prison and fines up to $250,000 per count. Civil penalties include the Trust Fund Recovery Penalty (100% of unpaid employee taxes) assessed personally against responsible persons.

What is criminal payroll tax evasion?

Under 26 USC § 7202, any person required to collect, account for, and pay over employment taxes who willfully fails to do so commits a felony. Unlike a civil TFRP, this is a criminal prosecution with up to 5 years imprisonment per count.

How does the government prove willfulness?

Patterns of withholding employee taxes while paying other creditors, owner draws while 941s go unpaid, prior IRS contacts about the same conduct, and use of nominee entities. The government builds willfulness from documents and bank records — we attack it on the same terrain.

Can a payroll tax case be resolved civilly?

Yes, but only if engaged early. Once IRS-CI is involved, the civil and criminal tracks diverge. The earliest possible attorney involvement — before any agent interview — preserves the best options.

What's the difference between payroll tax evasion and failure to pay?

Evasion requires willful intent to defraud — actively concealing income or assets to avoid paying. Simple failure to pay, while still a violation, is generally treated as a civil matter unless the IRS proves willful intent.

What are the penalties for payroll tax evasion?

Criminal penalties include up to 5 years in prison and fines up to $250,000 per count. Civil penalties include the Trust Fund Recovery Penalty (100% of unpaid employee taxes) assessed personally against responsible persons.

What is criminal payroll tax evasion?

Under 26 USC § 7202, any person required to collect, account for, and pay over employment taxes who willfully fails to do so commits a felony. Unlike a civil TFRP, this is a criminal prosecution with up to 5 years imprisonment per count.

How does the government prove willfulness?

Patterns of withholding employee taxes while paying other creditors, owner draws while 941s go unpaid, prior IRS contacts about the same conduct, and use of nominee entities. The government builds willfulness from documents and bank records — we attack it on the same terrain.

Can a payroll tax case be resolved civilly?

Yes, but only if engaged early. Once IRS-CI is involved, the civil and criminal tracks diverge. The earliest possible attorney involvement — before any agent interview — preserves the best options.

You Are Not The First. You Will Not Be The Last.

Payroll Tax Evasion Defense

Defense for employers facing payroll tax fraud and trust fund recovery penalties.

IRC Authority§ 7202

Max Prison5 years per count

Civil Penalty100% of trust fund taxes (IRC § 6672)

Responsible PersonAnyone with authority over funds

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One honest conversation. You'll hang up knowing exactly what the IRS can — and can't — do to you, and how we'll stop them.

Call (877) 829-5267

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Legally reviewed byGregory McCauley Jr., Esq.

Tax Attorney · Villanova University School of Law · Admitted in Delaware, New Jersey, United States Tax Court

Last reviewedDecember 22, 2025

What This Actually Is — And How We End It

The Truth About Payroll Tax Evasion Defense — And What To Do Right Now

Payroll tax evasion — willfully failing to collect, account for, or pay over employment taxes — is prosecuted aggressively by the Department of Justice. Responsible persons face both criminal penalties and personal civil liability under the Trust Fund Recovery Penalty.

McCauley Law Offices defends employers and responsible persons against criminal payroll tax charges while simultaneously addressing the civil tax liability.

Payroll tax crimes carry both criminal and civil consequences. Even if criminal charges are resolved, the IRS will still pursue the Trust Fund Recovery Penalty (100% of unpaid employee taxes) against responsible persons. We address both fronts simultaneously.

Criminal vs. Civil Payroll Tax Liability

The government uses two tracks against employers who don't pay payroll taxes:

Criminal (IRC § 7202): Up to 5 years per count for willful failure to collect, account for, and pay over employment taxes
Civil (IRC § 6672): The Trust Fund Recovery Penalty — 100% of the unpaid trust fund portion assessed personally against each responsible person

The key distinction is willfulness. Criminal prosecution requires proof of willful intent — you knew the taxes were due and deliberately chose not to pay. Civil liability requires only that you were a responsible person who willfully failed to pay, with a lower standard of proof.

Many payroll tax cases involve business owners who fell behind during financial difficulty — not people trying to defraud the government. We humanize our clients' situations and demonstrate the circumstances that led to non-payment, often preventing criminal charges entirely or negotiating significant reductions.

You Are Not Alone

People Just Like You Have Sat In This Exact Chair

They were terrified. They were ashamed. They thought they were the only one. Then they made one phone call — and everything changed.

CFO Charged as Responsible Person

A company CFO was charged with willful failure to pay over payroll taxes. We demonstrated she had raised the issue with the CEO repeatedly and was overruled, resulting in dismissal of all charges against her.

§ 7202 Investigation Closed Civilly

A Wilmington restaurant owner under IRS-CI investigation for 8 quarters of unpaid 941s engaged us pre-charging. We negotiated a civil resolution, full payment plan, and the criminal investigation was declined.

Sentence Mitigation Below Guidelines

A Berks County client convicted on three § 7202 counts received a sentence well below the guideline range after we developed mitigation tied to his cooperation with civil resolution and restitution payments.

Every Day You Wait, The IRS Wins A Little More.

Penalties stack. Interest compounds. Legal options quietly disappear. One free call ends the spiral.

Call (877) 829-5267

From Panic To Peace Of Mind

Exactly How We Take This Off Your Shoulders

The hardest step is the first one. Everything after that, we carry for you. No surprises. No runaround. No lectures.

1
Lock down attorney-client privilege immediately
First step in any potential criminal case. We separate the lawyer relationship from any accountant relationship that lacks privilege.
2
Reconstruct the full payroll history
Bank records, 941s, state filings, W-2/W-3 — we know what the government has before they show us.
3
Assess willfulness exposure
Pattern of payments, prior IRS contacts, distributions to owners — we identify what helps and what hurts.
4
Engage prosecutors strategically
Where appropriate, we open a controlled dialogue with the AUSA aimed at civil resolution or declination.
5
Defend through trial or sentencing
If charged, we litigate vigorously; if a plea is the right call, we drive maximum mitigation.

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Trusted by Thousands of Taxpayers

Real results from real clients

"McCauley Law resolved my $180,000 IRS debt for a fraction of what I owed. I was facing wage garnishment and bank levies — they stopped everything and negotiated an incredible settlement."

Robert M.

"After years of IRS letters and threats, Gregory and his team got my penalties completely removed. They were professional, responsive, and genuinely cared about my case."

Sandra L.

"They stopped a wage garnishment within 48 hours and ultimately settled my case for pennies on the dollar. I can't recommend them enough."

Michael T.

"I hadn't filed taxes in 5 years and was terrified. McCauley Law handled everything — filed all my returns, negotiated with the IRS, and got my penalties reduced by 80%."

Jennifer K.

"As a small business owner, I was facing $250,000 in payroll tax debt. Their team negotiated an Offer in Compromise that saved my business."

David R.

"My ex-husband's tax fraud left me liable for $135,000. McCauley Law got full innocent spouse relief — I owe nothing. They gave me my life back."

Maria G.

"Facing criminal tax charges was the worst experience of my life. Gregory McCauley's defense was brilliant — charges reduced, no prison time. Forever grateful."

Thomas W.

"The IRS had a lien on my home and was threatening seizure. McCauley Law negotiated a manageable payment plan and got the lien subordinated so I could refinance."

Patricia H.

"Professional, knowledgeable, and responsive. They explained every step of the process and kept me informed throughout. Resolved my $92,000 tax debt for $8,500."

James C.