Payroll Tax: Can I Go to Jail For Not Paying?
Yes — but usually only in cases involving willful failure to collect or pay over payroll taxes. Most businesses that fall behind face civil penalties first, but intentionally using withheld payroll taxes for other purposes can lead to criminal prosecution, significant fines, and imprisonment.
At Tax Relief Advisers, we understand it’s easy to fall behind on payroll taxes and use the funds for other purposes. Staying up-to-date on payroll tax reporting and payments is essential. The consequences are not worth the risk. The Internal Revenue Service has systems in place to help you get back on track, and we have experienced staff members to help you navigate its regulations. We specialize in payroll tax issues and helping you create a plan to get back on track with your payroll taxes. We wrote a blog about what payroll taxes are as well, as a resource to you. But let’s go over it again here.
What Are Payroll Taxes?
The payroll tax has two components: contributions withheld from your employee’s wages, and matching taxes paid by you (also known as the trust fund portion).
It’s calculated based on wages, salaries, and tips paid to the employee.
What Happens if I Don’t Pay Payroll Taxes?
If you are behind on your taxes, expect to receive letters from the IRS. If you do not respond, then an IRS Revenue Officer will visit your place of business or home. Collection of the payroll tax is extremely aggressive — if the IRS doesn’t collect from your business then you will be responsible personally.
It may not just be you. Revenue officers will determine responsible parties and visit with anyone who they deem could have, or should have, made sure payroll taxes were paid. For example, a responsible party could be anyone with a bank account, signature card (active or not), a secretary or bookkeeper, business partners, directors, stakeholders, or managers. They can do this through a mechanism called the Trust Fund Recovery Penalty (TFRP).
Who Are Revenue Officers?
Revenue officers are employed by the IRS. Their job is to collect what you owe as quickly as possible. They can be reasonable or they can be challenging. If you choose to deal with them on your own you are, essentially, representing yourself during an investigation. If you do not have experience with IRS revenue officers, we do not recommend doing this. Your best chance at lessening your penalty and creating a working plan for the future is to hire a professional to help you.
Beware of IRS scams as well. A real IRS revenue officer will never try to collect payments over the phone. Scams are another reason you should work with a professional. For more information about IRS scams, please visit the IRS website.
What are the Repercussions?
If an IRS revenue officer visits you, that simply means you’re behind on tax payments and the IRS is seeking information. Many things can happen after that, but at this juncture, you need to be careful. This is not a time to pretend you are a negotiator or hide.
Civil Penalties & Asset Seizure
A civil penalty is a non-criminal financial penalty imposed by a government agency as restitution for wrongdoing. This means you will typically pay a fine on top of what you owe.
The IRS can seize the funds from your business. They can seize your business’s bank account(s), accounts receivables, inventory, and business assets to cover what you owe.
Tax Relief Advisers is well-equipped to handle this process to help you take control of your finances again. We work with the IRS revenue officer so you can continue running your business. We work with you to come up with a plan to resolve tax problems.
Criminal Penalties
It is a crime to not pay payroll tax to the IRS and divert the money to other sources. This is usually reserved for the most egregious cases, but it is IRS code and is strictly enforced when discovered. It can result in jail time, incarceration, probation, legal fees, revocation of certain licenses, loss of certain rights, severe immigration or naturalization consequences, and more.
Under IRS Tax Code, a willful failure to pay or collect payroll tax is a felony punishable by up to a $10,000 fine per count, and/or five years in prison. Take our prudent advice and hire a professional.
Remember, the IRS targets any responsible party, so the person at fault may not just be the business owner. These charges can apply to any involved — corporate officers, partnership members, employees, and others responsible for collecting and paying or withholding taxes.
Real-Life Examples of Tax Evasion
In January 2013, a Maryland business owner named Alphonso Tillman was sentenced to 2 years in prison, with 3 years of supervised release, after he failed to pay employment taxes. He was also ordered to pay restitution of $2,205,991. The $2.2 million was withheld from his employee’s taxes and used for Tillman’s personal gain.
In July 2026, William Brent Stephens and his son, Zackary Sulpizi, entered guilty pleas on charges of tax evasion, failing to collect, account for and pay over payroll taxes, bankruptcy fraud, bank fraud, and providing false statements to the IRS. Between 2019 and 2022, they paid over $1.1 million in cash wages directly to their employees. While they physically withheld the required federal taxes from some paychecks, they hid the cash wages from the IRS to avoid their employer matching taxes. They operated a New Jersey landscaping company.
Get Payroll Tax Professionals on Your Side
Dealing with IRS revenue officers on your own is a high-risk endeavor. To avoid dealing with the above enforcement actions, trust Tax Relief Advisers to help. We will save you time, money, and frustration
We offer boutique-style services, serve all 50 states, and will set up payment plans. Give us a call today for a free consultation to get your life back from the IRS.