Common Tax Crime by Business Owners: Employment Tax Evasion

business ownerAs a business owner, it is easy to slip into questionable business practices. When it becomes a slide, it is important to know what can happen—and where to get help.


Consider the following:


  • In early January, the owner of a seafood processing business in New Bedford, Massachusetts was sentenced to three years in prison. The gentleman made a very good living, earning “hundreds of thousands of dollars in income,” according to the Department of Justice (DOJ). In 2009, the fellow ceased to file annual income tax returns. Catching the attention of the Internal Revenue Service (IRS), the man then proceeded to play whack-a-mole with the IRS. He filed fraudulent forms, converted his income to cash, and paid the IRS with rubber checks to extinguish his tax liability of $350,000.00.


  • In mid-January, the manager of a restaurant chain in San Diego pled guilty to employment tax fraud. The manager oversaw the operation of a group of five restaurants and more than 110 employees. In 2014, the man contacted the outsourced payroll company to cease making employment tax payments. From 2014 through 2017, the company filed no employment tax returns or paid taxes, racking up a tax liability of $1.5 million. The manager used the money for his personal expenses and other creditors. He faces a maximum of five years in prison and has agreed to pay $2.5 million in penalties, restitution, and interest to the IRS.


Under pressure or underwater on their bills, business owners may take liberties with responsibilities accorded to them by the government. This might include filing false tax returns, paying workers under the table in cash, leasing employees in a manner to avoid true payroll counts, and other types of employment and tax fraud.


Employment tax disputes are common in business, but they do not need to lead to years in prison when an idea becomes a scheme. While some business owners or operators do not get caught, oftentimes they do. The trip-up leads to an IRS criminal tax investigation or tax litigation, and a fate similar to our friends in Massachusetts and California noted above.


If you are considering or involved in filing fraudulent tax documents, rigging your payroll, or playing with payments due to the IRS, you are heading down the wrong path. An experienced criminal tax defense attorney can help you exit that avenue, find solutions to your business troubles, and work to resolve potential criminal allegations with the IRS. Not interested in prison? Make the call today.


Seasoned tax lawyers help you with tax controversy and IRS criminal investigations

From offices in Chicago and Cleveland, Robert J. Fedor, Esq., LLC offers strong and strategic legal representation to clients throughout the US and abroad on matters of business or offshore tax, bankruptcy, and civil or criminal audits. When you have questions about individual or business tax compliance, call us at 800-579-0997 or contact us.


Download The Guide to  Employment Tax Fraud