Question

In order to improve the cash flow of the company, Neal Emerald decided to postpone depositing all employment taxes a few months ago. He told his sales manager, "I'll pay up before the IRS catches me." What risks does Emerald face by not upholding his responsibility for the collection and payment of employment taxes?

Answer 1

Although the strategy that Emerald followed was right in his opinion but the way he communicated to the sales manager was inappropriate. He should have understood that all employees will not be willing to take the business risks. When the company's cash condition gets severe then it may lead to shut down of the company, and Emerald was knowing the sensitivity of cash flow, however does not disclosed the facts to the sales-manager.

Because of Emerald action the business owner will face problems in the long run. It will create a wrong opinion in the employee's mind and as a result the attrition rate may increase. They may also file a legal case against the business owner. The employment taxes should be paid on time to prevent the penalty from IRS. The IRS considers this a crime and may cause the Emerald to lose the company, seizing property and heavy penalties.