According to a Department of Justice press release, a California CEO recently pleaded guilty to failing to properly pay over employment taxes as required by law. This story should remind taxpayers who have an obligation to pay over employment taxes that the IRS has increased its enforcement efforts over the past year. Additionally, the IRS has historically criminally targeted taxpayers who have not complied with employment tax obligations. If you have failed to properly account for or pay over employment taxes for one or more years, it is in your best interest to contact an experienced employment tax defense attorney to discuss your options to get right with the government before you are the target of an audit, eggshell audit, reverse egg shell audit or criminal tax investigation or face criminal tax charges.
Defendant Admitted to Using Withheld Employment Taxes for His Own Benefit
Court records reveal that Michael Todd Lucas was the CEO of i3 Brands, Inc, a software development business. As part of his role as CEO, Lucas had control over the company and thus, had a legal obligation to ensure that employment taxes were properly accounted for and paid over to the IRS. Lucas admitted that he withheld amounts from employees’ paychecks but did not pay over such withholdings to the IRS. Instead, he used the funds to pay for his own personal expenses. Lucas admitted that between 2008 and 2017, he was responsible for failing to pay over $4.9 million in payroll taxes, penalties, and interest.
Lucas will be sentenced later this fall. In addition to facing up to five years in prison, he also can be sentenced to a period of supervised release to commence upon the completion of his physical incarceration. Lastly, Lucas will likely be ordered to pay restitution to the IRS, representing the tax loss that he caused the government.
Coming into Employment Tax Compliance with the Assistance of a Tax Attorney
As we have attempted to impress upon our readers in previous stories and articles, the IRS and state taxing authorities take employment-related taxes very seriously. Tax authorities receive most of the tax revenue paid by wage-earners through withholding mechanisms. When a taxpayer fails to properly withhold, account for, and pay over such amounts, the ability of the IRS to efficiently collect tax revenue is threatened. Because of the increased ability to disrupt the tax collection process, employment-related tax crimes are often prosecuted swiftly and can carry severe consequences.
If you have failed to properly withhold payroll-related taxes, account for such amounts, and pay over withholdings to the IRS, it is in your best interest to contact an experienced tax attorney as soon as possible to discuss your options. Together, you and your seasoned tax attorney will identify areas of exposure and collectively determine the best course of action to come into compliance.
We Are Here for You
Regardless of your business or estate needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business and our team will help ensure that your business is too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.
In addition to our main office in Irvine, the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los Angeles, San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, Carlsbad and Sacramento. During the COVID-19 pandemic, our staff are working from home, but have full virtual meeting capability.
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Questions about delinquent payroll taxes and trust fund recovery penalty
- What happens if an employer continues to incur new payroll tax liabilities?
- California Employment Taxes Basics
- How Does the IRS Develop an Employment Tax Fraud Case from the First Indication of Fraud to a Criminal Indictment?
- Can more than one person be considered responsible by IRS
- How unpaid employment tax payments are allocated
- When a corporate officer is considered a responsible party
- Examples of trust fund recovery penalty determinations
- Failing to pay employment taxes after notice is given
- How to determine responsible person for trust fund recovery
- Assessing trust fund recovery penalty and option to appeal
- What is the trust fund recovery penalty?
- What are the penalties for failure to pay employment taxes
- When am I considered liable for company’s employment taxes
