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May 27, 2016

Defending Taxpayers in Criminal Tax Investigations Involving Employment Taxes

The criminal tax attorneys at Nardone Limited in Columbus, Ohio, continuously monitor and defend taxpayers in civil and criminal tax investigations and prosecutions. To properly represent a taxpayer confronted by the substantial resources and long-arms of the IRS and the Department of Justice, the criminal attorneys handling your tax investigation must specialize in criminal tax cases to ensure you are competently represented.  Anything less is simply unacceptable. That is why we focus a substantial amount of time and investment fighting the good fight for our clients that have found themselves ensnared by a criminal tax investigation.  In our prior article regarding tax evasion, we discussed the IRS’ criminal tax enforcement impacting taxpayers that do not collect or pay over their required employment taxes.  As that article confirmed, taxpayers who commit tax crimes, such as: (i) filing false returns; (ii) failing to remit withheld taxes; or (iii) assisting others in similar acts, face severe punishments if convicted. These same taxpayers may also find themselves defending and responding to a civil injunction filed by the IRS for failing to collect or pay over the employment taxes.   

General Background

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. Generally, 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 worker’s responsibility to pay the employment taxes, since there is no specific employer when you are self-employed. The IRS frequently investigates employers, or individual taxpayers, who fail to withhold or remit federal employment taxes. More recently, the IRS has expanded its use of civil injunctions to strengthen employment tax enforcement.  The injunctions generally involve the requirements that: (i) employers must pay taxes on time; (ii) employers must notify their revenue agent or revenue officer when taxes have been transmitted; and (iii) employers must inform the IRS if they establish a new business.   

IRS Issues Civil Permanent Injunction against Florida Business and Individual Owners

In April 2016, the IRS obtained an order from the District Court, in the Southern District of Florida, granting a permanent injunction against Rafael Mayeta and Federal Security Services, Inc. (the “Defendants”).  The IRS had filed a complaint for permanent injunction under 26 U.S.C. §7402(a) against the Defendants.  The order restrains and enjoins the Defendants from:

  1. Failing to pay over to the IRS employment taxes withheld from employee wages;
  2. Failing to make timely federal employment and unemployment tax deposits and payments to the IRS;
  3. Failing to file timely federal employment and unemployment tax returns;
  4. Assigning any property or making any disbursements until all required taxes that accrue after the injunction date are paid to the IRS;
  5. Owning or operating any new or unknown company or business within five years without notifying the IRS;
  6. Failing to notify the IRS of their future employment tax conduct; and
  7. Failing to provide proof to the IRS of their compliance with the injunction.

Effectively, the civil injunction shut down the taxpayer’s business and made it much more difficult to operate. The concern, however, is that the IRS and the Justice Department took such action, subject to a much lower burden than in a criminal tax enforcement case. This makes it much easier for the IRS and the Justice Department to take this type of action and makes it much more difficult for taxpayers to defend against those actions.

Vince Nardone Comment: The IRS’ use of, and expansion of, powers under the civil injunction procedures allows the IRS to bypass the higher burden and standards of proving someone guilty beyond a reasonable doubt. Ultimately, the IRS may pursue and charge the taxpayer criminally. But, the civil injunction procedure provides them a much lower burden and standard to adjoin and restrain taxpayers from taking steps that the IRS believes is illegal. There are instances and cases, however, in which the IRS simply has it wrong and, in those instances, the taxpayers need to be able to defend against the IRS’ complaint and pursuit of a permanent injunction.

Contact Nardone Limited

Nardone Limited 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, revenue agent, or special agent—or if you are currently facing a civil or criminal tax investigation—contact one of our experienced tax attorneys today. Nardone Limited’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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May 27, 2016

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