A pyramid is a stable, solid form. As a payroll tax scam though, it is pretty shaky.
“Pyramiding” is a business model involving companies doing business for a relatively short period of time that collects employment taxes for its workers but fails to turn funds over to the Internal Revenue Service (IRS). When time runs out for the business as a going concern, the business files for bankruptcy to see its financial liabilities discharged. The owner operators then pack up and move elsewhere in the region, or in the country. This kind of scam is not to be confused with a multi-level marketing or pyramid scheme, although it is common for either a pyramid scheme, or pyramiding to result in criminal tax charges.
Another term for “pyramiding” is an in-business repeater, that is, people who stay in business, creating financial liabilities from which relief is sought in bankruptcy court, or which simply go unpaid. When the pattern is recognized, those involved may be charged with tax crimes—if they can be located.
A “repeater” is a discretionary term used by the IRS for someone with multiple tax liabilities. It is not often used for someone with tax problems who is trying to work their way out of a financial fix, but for those committing tax fraud in the form of wind-down and pop-up businesses.
Being an in-business repeater earns you special attention by the IRS. Once on your trail, the IRS usually stays there, waiting for your repeat business. The IRS usually closes in fairly quickly on repeaters with significant tax obligations, by seizing assets and commencement of other legal proceedings.
As well, in-business repeaters are usually tagged with paying taxes they failed to pay previously, with substantial penalties.
The IRS is one of the more difficult branches of the government with which to work. As lawyers who work with criminal tax defense, we routinely handle fallout from false tax returns, unreported income, employment taxes spent on personal expenses, and people who have been involved in pyramiding. If you are aware of shadows in your tax and business dealings, remember the sooner you get good legal advice, the quicker you may be able to mitigate the damage to your future.
There is nothing stable about pyramiding or other forms of tax fraud. Stop looking over your shoulder. If you know you could be facing criminal tax charges—do yourself a favor and talk to a good criminal tax defense attorney.
Aggressive tax defense if you face an IRS criminal tax investigation
The tax attorneys at Robert J. Fedor, Esq., LLC provide experienced legal guidance if you are involved in tax litigation or are questioned about a payroll tax issue. With offices in Chicago and Cleveland, we serve clients locally and abroad. Call 800-579-0997 or contact us today.