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February 23, 2015

Failure to Remit Withheld Employment Taxes (i.e. Tax Evasion) Can Result in Severe Criminal Consequences

The tax attorneys at Nardone Law Group in Columbus, Ohio, continuously monitor the Internal Revenue Service’s efforts to eliminate tax fraud, through civil and criminal tax investigations. In our prior article on Criminal Tax Convictions, we discussed a recent decision by the U.S. Court of Appeals highlighting the government’s authority to criminally punish fraudulent taxpayers.  It is important that taxpayers are aware that the IRS also has the ability to conduct both civil and criminal investigations, which may result in fines, as well as sentences of incarceration. Taxpayers who commit tax crimes, such as filing false returns, failing to remit withheld taxes, or assisting others in similar acts, can face severe punishments if convicted.

Employers are required by law to withhold employment taxes from all employees. Employment taxes include: (i) Federal Income tax withholding, and (ii) Social Security and Medicare taxes. Both employers and employees are responsible for the collection and remittance of employment taxes to the IRS. Usually, the employer will withhold these taxes on behalf of their employees, but in certain cases, such as when an individual is self-employed, it is the employee’s responsibility to pay the withheld employment taxes. The IRS frequently investigates employers, or individual taxpayers, who fail to remit federal employment taxes. Employers who fail to withhold employment taxes, or fail to remit them to the IRS, may be subject to criminal and civil sanctions.

Virginia Businessman Sentenced to Prison for Employment Tax Fraud

In June 2014, a Virginia businessman (the “Debtor”) plead guilty to failing to collect and remit more than $2.2 million in employment taxes, as well as the theft of over $186,000 from an employee pension plan. The Debtor served as executive chairman of a corporation and, from 2009 through 2011, was responsible for collecting, accounting, and paying the company’s payroll taxes to the IRS. Although appropriate payroll taxes were withheld from employee wages, the Debtor failed to pay both the employee withholdings and the employer’s matching portions to the IRS.

Furthermore, the employees were able to contribute portions of their paychecks to a qualified pension plan, which would be administered by an asset custodian. The Debtor, who was responsible for authorizing these payments, failed to send them to the asset custodian over the course of three years. This resulted in a loss of $186,263. Finally, the Debtor used company accounts to complete a variety of personal purchases. These purchases included $505,871 for the use of a Washington, D.C. football stadium executive suite and $40,000 for the sponsorship of a horse race in Virginia.

 In September 2014, the Debtor was sentenced to 18 months in prison, with three years of supervised release, and was ordered to pay more than $1.6 million in restitution to the IRS. This sentence is to be served consecutively to a 28-month prison that the Debtor was already serving, in relation to campaign finance violations the Debtor made in the 2008 presidential primary and a 2006 U.S. Senate campaign.

NLG Comment: Failure to remit employment taxes can result in severe consequences for both employers and employees. Employers may be subject to criminal and civil sanctions, while employees might not qualify for social security, Medicare, or unemployment benefits, due to the employer’s failure to pay employment taxes. If you or your business have been contacted by an IRS revenue officer, or are currently undergoing an investigation, it is important to consult with an experienced tax attorney to find out what solutions are available.

Contact Nardone Law Group

Nardone Law Group routinely represents businesses and individuals who are undergoing an IRS audit, examination,  or investigation, including criminal tax investigations. If you have been contacted by an IRS revenue officer, or if you are currently facing a civil or criminal tax investigation, contact one of our experienced tax attorneys today. Nardone Law Group’s tax lawyers and professional staff have vast experience representing taxpayers before the IRS. We will thoroughly review your case and determine what options and alternatives are available.

Contact us today for a consultation to discuss your case.

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February 23, 2015

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