The violation of state and federal tax laws oftentimes come across to taxpayers as a victimless crime. At the outset of criminal tax activity, those taxpayers engaged in tax fraud, tax evasion, or a myriad of other tax crimes typically justify their actions by thinking “everyone is doing it” or “this isn’t hurting anyone”. And although the IRS and Department of Justice cannot detect 100 percent of those cheating the tax system, those who are identified and investigated face very serious life altering consequences, including a lengthy prison sentence and career ending loss of licensing if they are any kind of professional.
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Business Owners Failed to Pay Over Payroll Taxes, Convicted
According to a Department of Justice press release, a married couple in West Virginia recently pleaded guilty to various tax-related criminal charges. Russell and Karen Rucker, of Huntington, West Virginia, owned and operated Rucker, Billups and Fowler, Inc. (RBF). The Ruckers’ company was in the business of providing insurance plans to individuals and businesses. Prosecutors alleged that among other things, the Rucker’s misappropriated monies that were properly withheld from their employees’ paychecks.
Prosecutors alleged that beginning 2013, Russell Rucker served as RBF’s President and Karen Rucker served as the company’s financial officer. Prosecutors further alleged that between mid-2015 and mid-2018, the Ruckers caused more than $140,000 in payroll taxes to be withheld from the paychecks of RBF employees. Instead of properly paying the monies over to the IRS, the couple used the funds to further their own extravagant lifestyle.
According to court documents, although the Ruckers’ knew that the IRS had initiated collection efforts against them, they took steps to conceal their income. For example, the couple paid themselves over $500,000 in salary between 2014 and 2016. In an effort to conceal that and other income, they deposited their income into bank accounts of another individual and paid most of their personal expenses, including their mortgage and other bills in cash.
In addition to attempting to dodge the paying over of the payroll taxes that were due from RBF, the Ruckers attempted to evade the payment of nearly $115,000 of Russell Rucker’s prior year tax liability dating back to 2001. The couple caused paychecks issued to Russell Rucker to be disguised as the repayment of a note, which would typically not be taxable. Finally, the Ruckers failed to file their individual and RBF corporate tax returns for tax years 2014 through 2017.
The IRS estimates that the total tax loss associated with the Ruckers criminal activity exceeds $250,000. As a part of their guilty plea, the Ruckers agreed to plead guilty to tax evasion, which carries a statutory maximum of five years in prison. Additionally, both Russell and Karen Rucker face fines, penalties, and restitution. Finally, each could be sentenced to an additional term of supervised release once their physical incarceration in federal prison ends.
Understanding Payroll Tax Obligations
Those who are responsible for the payroll and tax function within a business, along with its owners, are generally responsible for ensuring that payroll taxes are withheld, properly accounted for, and paid over to the IRS in a timely manner. The IRS has a tendency to come down extremely hard on those who violate payroll tax laws. Although the reasons for the severity of the crime are plentiful, the most prominent reason is that payroll tax withholding is the mechanism whereby the IRS collects the majority of its tax revenue. Although many Americans owe additional taxes upon filing their federal tax return, the lion’s share of their taxes were paid throughout the year in the form of payroll tax withholdings.
If you are a business owner who may be out of compliance with federal or state payroll tax withholding laws, it is in your best interest to contact an experienced tax attorney as soon as possible. As evidenced in the story above, the potential consequences for payroll tax noncompliance can be serious, there are programs that have been established by the IRS and state tax authorities to help business owners come into compliance with payroll tax withholding laws. A payroll tax defense lawyer has both the experience and technical tax knowledge to help you navigate the oftentimes murky waters of coming back into compliance with tax laws.
Contact an Experienced Tax Attorney Today
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have worked with business owners of companies ranging in size from large to small. If you have received notice from the IRS or state taxing authorities that your payroll tax withholding, accounting, and remittance procedures are being scrutinized, our team of zealous advocates will help you develop a legal strategy aimed at preserving the integrity of you and you business. Do not let the threat of a criminal investigation or prosecution keep you up at night. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
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