A recent payroll tax case prosecuted by IRS criminal tax investigation agents drives home a message about the importance of accurate payroll records and tax payments.
Huong Le and Tien Chau operated four temporary labor companies that did business in New Hampshire and Massachusetts. Between 2006 and 2011, the primary business activity was carried out under companies with four different names. Family members of the pair were named as owners of the businesses to avoid the two being associated with their operations.
During the time they conducted business, Le and Chau inaccurately reported the number of their employees to the Internal Revenue Service. In addition, the business owners paid many of these employees under the table, often by directing supervisors and managers to pay workers in cash.
Paying in cash without proper documentation and underreporting employees is a problem for the IRS. While you may already have guessed, the pair also had a payroll tax issue when they failed to collect and submit payroll taxes.
A conspiracy to defraud the IRS
At this point, Le and Chau were in trouble for paying more than $11 million in cash to their employees without reporting it. In addition to conspiring to defraud the IRS by concealing their workforce, they neglected to pay employment taxes on those workers. But it gets worse—Chau and Le were also charged with obstructing the IRS investigation.
When the pair discovered an employee was to be interviewed by IRS special agents, they directed her to help them shred and destroy business records, computer disks, and remove computers from the office.
Our legal team works regularly with executives and individuals who receive notices of IRS civil or criminal tax audits. We help and counsel our clients through tax controversy of any scale to reach an acceptable outcome, sometimes through an offer in compromise, or other solution to ensure our clients find the best resolution for the facts of their case.
An important rule of managing an IRS criminal tax investigation, or audit, is to ensure that documents and information are preserved. It is never a good strategy to destroy evidence when you learn about an impending civil or criminal tax investigation.
Ultimately Le pled guilty to conspiracy to defraud, failure to pay employment taxes and obstruction. While she will be sentenced in June, 2018, she is looking at a maximum penalty of five years in prison in addition to several years of probation, restitution of $256,627, and money fines.
Part of the fines in this case will likely be a Trust Fund Recovery Penalty (TFRP) which can be levied against someone who is responsible to collect payroll taxes and willingly chooses not to collect or to pay them over to the IRS.
If you are aware of potential tax fraud in your returns, or your enterprise, talk to an experienced tax defense lawyer.
Strategic legal representation on criminal tax matters
From offices in Cleveland and Chicago, the tax attorneys at Robert J. Fedor, Esq., LLC help you handle IRS tax challenges whenever they arise. When you need confidential, responsive, legal advice locally or abroad, call 800-579-0997 or contact us.
