A successful businessman crosses the line into employment tax fraud and is going to prison. A short but sadly common story for some individuals responsible for paying over employment taxes to the Internal Revenue Service (IRS).
Collection and payment of employment taxes is a common requirement for most business owners. Whether they personally handle the job, employ an accountant, or pay an outsourcing vendor, workers depend on payment of their withheld dollars to provide benefits in due time, and the U.S. Treasury expects the contribution. Payroll taxes include federal taxes, Medicare, and Social Security taxes. Employers must report wages withheld and deposit them on time. It is a routine and necessary aspect of business—until it is not.
Employment tax fraud is too often a tax crime of opportunity. Wages being withheld from employee wages are held in an account and processed to the IRS. Maybe it started with siphoning off just some of the withheld payroll taxes—with time it can become wholesale cashing out of the withholding account.
We have a prime example to share. George Taylor of Wilmington, North Carolina, was the owner and president of a successful high-performance auto services company called “National Speed.” By all accounts, the business did well. Mr. Taylor was responsible for the collection and pay over of employment taxes to the IRS. Inexplicably, in 2014, Mr. Taylor crossed that quiet line into tax crime.
From 2014 through 2021, Mr. Taylor withheld the employment taxes of his workers but failed to pay them over to the IRS. He also failed to prepare and file the required employment tax returns. Instead, he used the money for business expenses and personal purchases. In the time frame in question, Mr. Taylor failed to pay over $2 million.
Spending, instead of paying over employment taxes, is guaranteed to be discovered. Employees basically buy into the U.S. retirement and disability safety net through their withheld wages. Eventually, the numbers will not balance and the missing employment taxes will be flagged. Noted an IRS Special Agent from the Charlotte Field Office, “Employment tax evasion results in the loss of tax revenue to the United States government and can cause financial hardship to employees in the form of lost or delayed social security or Medicare benefits.”
Mr. Taylor pled guilty for failure to file employment tax returns and pay over the $2 million he owed. He faces up to five years in prison and will likely be required to repay the missing millions. Another IRS criminal tax investigation, another successful prosecution by the IRS.
At some point in 2014, Mr. Taylor decided to look the other way on the likely outcome he would eventually suffer in 2024. Maybe he could not stop once he got started, maybe he could not figure a way out. If this is you, and you are quietly pocketing payroll taxes instead of paying them, do yourself a favor—call an experienced criminal tax attorney and talk it over from the prospect of consequences, rather than easy cash.
Do you need experienced legal advice on an employment tax dispute or compliance question? We can help.
From offices in Chicago and Cleveland, Robert J. Fedor, Esq., LLC offers strategic legal guidance to clients throughout the U.S. and abroad on IRS audits, criminal tax investigations, payroll tax issues, and more. When you have questions about individual or business tax compliance, call 440-250-9709 or contact us online today.
