An Arkansas couple, in a highly unusual proceeding, was sentenced to jail time for failure to file and pay employment tax returns.
Mary I. Miller and her husband, Walter Randall Miller, pled guilty on March 24, 2003 to one count each of conspiring to defraud the United States by failing to file employment-tax returns or pay employment taxes from 1994 to 2002. The couple were both sentenced to five years of probation, conditioned on their agreement to a restitution agreement with the IRS.
In December 2006, the Miller's probation officer filed a petition to revoke the Miller's supervised release because they had not filed personal tax returns for 2005, had filed incomplete and inaccurate tax returns for the period 2000 - 2004, and had not paid their outstanding tax obligations to the IRS. The District Court revoked the Miller's supervised release and sentenced them to jail time of 14 months and 13 months, respectively, for failure to abide by the restitution agreement.
Nanny payroll taxes (employment taxes) are incorporated in the employer's personal Federal Income Tax Return, which is signed under penalties of perjury. Failure to report and pay the "nanny taxes" can be prosecuted as a felony, and consequently can jeopardize the careers of employers such as lawyers, physicians, accountants and all employers who require security clearances.
The Obama administration's intention is to pursue the tax gap (the gap between tax due and tax collected) with fervor. Their budget proposes a significant increase in IRS enforcement over the next several years. A single $35,000 a year nanny generates over $5000 in employment taxes, and will pay approximately $3000 in income taxes. If the estimates of 800,000 nannies being paid "under the table" are accurate, the "nanny tax" gap on nanny employment along is an astounding $6.7 BILLION per year! Factor in housekeepers, maids and elder caregivers and this number rises above $30B! These are significant numbers in times of tremendous revenue deficits.
