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Hammond Today
By the People, for the People
IRS Warns Employers and Employees About Payroll Tax Fraud
Serious federal penalties await those who fail to remit withheld funds to the IRS
Apr. 13, 2026 at 3:54pm
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A stark visual reminder of the grave financial and legal penalties that await employers who fail to properly remit payroll taxes.Hammond TodayThe IRS is cautioning both employers and employees about the growing problem of payroll tax fraud, where employers withhold taxes from paychecks but fail to properly remit those funds to the IRS. This practice not only deprives the government and workers of rightful tax revenue, but also gives dishonest businesses an unfair competitive advantage. The IRS highlights common red flags that employees should watch for, as well as the severe criminal penalties that employers can face for this trust fund violation.
Why it matters
Payroll tax fraud is a serious federal crime that undermines the integrity of the U.S. tax system. When employers fail to remit withheld funds, it deprives the government and workers of critical tax revenue, while also giving dishonest businesses an unfair advantage over competitors who play by the rules. The IRS is cracking down on this issue with high conviction rates and lengthy prison sentences.
The details
Employment taxes make up nearly 60% of all U.S. tax revenue and include both the employer's share of Social Security and Medicare taxes, as well as the amounts withheld from employees for federal income tax, Social Security, and Medicare. Employers are entrusted with safeguarding and remitting these 'Trust Fund Taxes' to the IRS on a quarterly basis. Failure to do so is considered a federal trust-fund violation, also known as employment tax fraud. Responsible persons, defined as anyone with the authority to collect, account for, and pay trust-fund taxes, can face criminal prosecution even if they did not directly exercise that authority.
- In a recent case, Benjamin Thomas, III of Hammond, Louisiana was sentenced on October 1, 2025 to 48 months in federal prison for five counts of failing to truthfully account for and pay over nearly $1 million in federal trust fund taxes from 2017 to 2018.
The players
IRS Criminal Investigation
The criminal investigative arm of the Internal Revenue Service that focuses on tax-related crimes, including employment tax fraud.
Benjamin Thomas, III
A Louisiana business owner who was sentenced to 48 months in federal prison for failing to remit over $970,000 in payroll taxes from 2017 to 2018.
Lighthouse Community Care, Inc.
A mental health services clinic based in Baton Rouge, Louisiana that was owned and operated by Benjamin Thomas, III.
What they’re saying
“When employers withhold payroll taxes, they are entrusted with funds that belong to their employees and to the American public. Employers who fail to remit employment taxes not only deprive their employees and the U.S. Treasury of funds that rightfully belong to them, they also gain an unfair competitive advantage over businesses that play by the rules.”
— Demetrius Hardeman, Special Agent in Charge, IRS Criminal Investigation, Atlanta Field Office
What’s next
The IRS encourages both employers and employees to be vigilant in monitoring for potential payroll tax fraud. Employees should watch for red flags like missing or inaccurate W-2s, unusual changes to pay stubs, and IRS notices that don't align with reported wages. Both employers and employees can report suspected fraud to the IRS Criminal Investigation division.
The takeaway
Payroll tax fraud is a serious federal crime that undermines the integrity of the U.S. tax system. The IRS is cracking down on this issue with high conviction rates and lengthy prison sentences for employers who fail to remit withheld funds. This highlights the importance of employers properly safeguarding and remitting employment taxes, as well as employees remaining vigilant in monitoring for potential fraud.
