By law, employers in the state of Oklahoma are required to withhold federal, state, and local taxes from their employees' paychecks, and to regularly forward this money to the IRS. If a company fails to pay its payroll taxes for any given year, that's bad enough; but if it continues to flout the law year after year, the IRS calls that “pyramiding” and eventually will impose severe penalties.
Tax Pyramiding Is Different from Regular Pyramiding
“Pyramiding” is a term used by the IRS which is somewhat confusing, because it is different than the classic financial pyramids with which most people are familiar. In a classic pyramid scheme, a company's original investors are paid off with the money put into the company by new investors, and these investors are then paid off by successive investors, until no more willing participants can be found and the whole structure collapses, leaving the last round of investors holding the bag.
An IRS pyramid is somewhat different. The term “pyramiding” refers to the fact that a company which collects payroll taxes from its employees, but doesn't forward these funds to the IRS, winds up building a “pyramid” of ill-gotten gains. In many cases, at some point the owners of the company simply disappear with the extra cash, or they declare bankruptcy when the IRS tries to collect and start a new company under a different name.
It is extremely difficult, if not impossible, to get away with an IRS pyramid, since the IRS usually immediately notices whether a business withholds payroll taxes. It may be possible for a small company to “fly under the radar” for several years—just as it's possible for an individual not to file taxes for several years in a row and be left alone by the government—but the IRS is bound to notice this transgression eventually. At that point, the penalties for pyramiding can be extremely severe, involving massive fines and even criminal prosecution.
Have You Been Accused of Tax Pyramiding by the IRS? You Need an Experienced Tax Lawyer
The withholding of Oklahoma payroll taxes, especially for an extended period of time, is a not a matter to be taken lightly. The IRS considers this a form of theft, no different in principle from robbing a bank. If you have been accused by the IRS of pursuing an Oklahoma payroll tax pyramiding scheme, you need to secure expert legal representation. A good start is to call the Oklahoma tax lawyers at Travis W. Watkins, PC (800-721-7054) for a free consultation.