Tax fraud does not pay—especially fraud involving employment taxes.
Payroll tax problems are not uncommon in business. Understanding how to categorize employees, collect, report, and pay over wage taxes is required of those who own or operate a business. A larger problem occurs when employer payroll taxes are collected but not reported or paid to the Internal Revenue Service (IRS). The IRS Tax Division is charged with identifying non-compliant employers, who may find themselves involved in an IRS criminal investigation.
In the IRS Crosshairs
One individual who found himself in the IRS cross-hairs was David Neel, the owner and operator of a business in Virginia focused on sleep disorders. As we have discussed before, employers and owners can quickly find themselves in difficulties with the IRS when they pay under the table, purloin payroll taxes, or file false payroll returns—among other issues. In some cases, theft of payroll taxes by an owner can be a desperate move to try and save a sinking bottom line. In other cases, it is a matter of proximity—business owners or their employees find the temptation of an account full of withholding too great to resist.
Neel is a member of the latter category, a sole owner who had no issue partaking of the payroll account. He sought an expensive lifestyle and found it in the monthly payroll withholding. Just some of his expenses, as detailed by the IRS, included:
- Education expenses for the daughter of a friend
- A new Ford F600 truck
- The rental of a 215-acre horse farm and house that came to roughly $220,000
- Life insurance expenses of $40,000
- About $30,000 for work on his personal (not rented) residence.
These goodies came at the expense of employees whose taxes were withheld but not paid to the IRS on their behalf from approximately 2015 through 2020, as well as employer taxes owed. During that time, Neel did not file a quarterly Federal Tax Return for his companies and paid over no wage withholding to the IRS—even though he was issuing annual W2s to his employees. Altogether, he took his employees and the IRS for about $460,543.
Sentenced in late February, Neel is going to prison for the next two years. That is a lot of time to consider horse farms and payroll taxes. If you know that you have payroll tax payment issues, speak with an experienced tax attorney with our legal group sooner rather than later.
Safeguard Your Business with Expert Tax Legal Advice
Navigating payroll taxes can be fraught with pitfalls. Don't let tax fraud threaten your business. At Robert J. Fedor, Esq., L.L.C., we provide the expertise needed to keep your operations compliant and secure. Contact our experienced tax attorneys today at 440-250-9709 and ensure your payroll practices meet all legal requirements. We serve clients across the U.S. and internationally from our offices in Cleveland and Chicago.
For further insight into avoiding common pitfalls, download our eGuide geared towards business owners. This resource offers a deeper understanding of payroll tax laws and practical tips to stay compliant.
