According to a Department of Justice press release, Robert Lewis of Virginia was sentenced to serve 21 months in a federal prison for crimes related to failing to remit payroll taxes. Court documents alleged that Lewis was the CEO of Enterworks, Inc., a software company based in Sterling, Virginia. Prosecutors proved that between early 2011 and early 2013, Lewis, with the assistance of Enterworks VP of Finance Kristie McDonald, concocted and executed a scheme whereby employees’ tax withholdings were not paid over to the IRS, as required by federal law.
The scheme involved paying employees using manually generated checks. Employees received the same amount of take-home income they otherwise would have, but the strategy bypassed the accounting system that would have automated the IRS remitting process. The government estimated that the Treasury lost out on $1.8 million in payroll withholdings that were misappropriated by Lewis and McDonald. Prosecutors also alleged that Lewis and McDonald failed to pass along employees’ voluntary retirement payroll contributions to the tune of $225,000.
Lewis and McDonald used the funds that weren’t properly directed to the IRS and the employees’ retirement accounts to pay Enterworks business-related bills. From 2011 through 2013, Enterworks was in a financial crisis and Lewis was willing to misappropriate the employee tax withholdings to ensure the company’s Board of Directors didn’t find out.
In addition to his prison term, Lewis was sentenced to three years of supervised release to be served after his federal prison stay and was ordered to pay over $1.8 million in restitution. Earlier this year, McDonald was sentenced to serve 15 months in prison and to pay restitution of more than $1.8 million.
Many of the stories we’ve covered relating to employment tax evasion and the misappropriation of amounts withheld from employees’ paychecks involve a business owner or executive that uses the stolen money to pay for his or her own luxurious expenses. In the case of Robert Lewis and Kristie McDonald, they were simply trying to keep the company afloat without the Board of Directors discovering the true economic health of the company. Nonetheless, this story demonstrates that no matter the altruism of those responsible for following the tax laws, violating them can land you in prison, on supervised release, and responsible for large sums of restitution.
If you are a business owner that is either looking to come into compliance with employment or payroll tax laws or are under audit or investigation for employment tax-related issues, it is in your best interest to contact an experienced tax attorney as soon as possible. Not only can a seasoned tax defense lawyer represent you in all interactions with the IRS or state tax authority, they can assist in formulating a plan to ensure that tax rules are complied with on a go-forward basis.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have assisted clients in a myriad of tax situations. Whether you are a business owner that is looking to come into compliance with the tax laws or you are under audit or criminal investigation by the IRS or state taxing authority, our team is ready to help you establish an effective legal strategy. Don’t let the threat of harsh financial penalties or a jail sentence keep you up at night. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
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