According to a Department of Justice press release, a pair of owners of adult foster care homes were sentenced recently for various tax crimes. Jeremiah Cheff and Nicolette Cheff were sentenced to serve 27 months in prison and two years of probation, respectively. The sentences related to tax crimes ranging from failure to comply with federal payroll tax requirements to failing to file individual income tax returns, and beyond. This story should serve as a reminder to taxpayers that regardless of your status in society, the IRS will pursue those who willfully or recklessly fail to follow the tax law.
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Court documents indicate that the Cheffs were the owners and operators of more than 15 foster care homes who specialized in housing those with intellectual, developmental, and physical disabilities and disorders. Prosecutors alleged that between 2010 and 2014, the Cheffs withheld payroll taxes from the paychecks of employees but did not remit the funds to the IRS or timely file required payroll tax returns. Because the Cheffs were in control of the financial aspect of the business, they both had the responsibility to ensure that payroll taxes were being properly withheld, accounted for, and paid over to the IRS in a timely manner.
In addition to failing to comply with established payroll tax laws, federal prosecutors alleged that Jeremiah Cheff did not file required individual income tax returns. Finally, when the IRS attempted to collect the payroll taxes that the Cheffs were responsible for paying over, Jeremiah Cheff attempted to dupe the IRS by sending them a fake financial instrument that claimed to have a value of $80,000.
Earlier this year, a federal jury found Jeremiah Cheff guilty of obstructing the IRS, failing to file his individual tax returns between 2013 and 2015, and 60 counts of willfully failing to account for and pay over payroll taxes. Nicolette Cheff resolved her open criminal charges by pleading guilty back in 2017 to charges of failing to file payroll tax returns and failing to file an individual tax return.
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In addition to Jeremiah’s prison sentence, he was sentenced to serve two years of supervised release after he is released from federal incarceration. The Cheffs were also ordered to pay nearly $200,000 in restitution to the IRS for lost tax revenue.
This story hits on several important points with regard to tax compliance and controversy. First, as we have mentioned plenty of times before in our blogs, payroll tax is the mechanism whereby the IRS receives tax withholding from employees. When business owners and professionals fail to comply with federal payroll tax laws, the integrity and effectiveness of that mechanism is threatened and the IRS and Department of Justice will vigorously pursue charges against those who willfully violate them.
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Second and most importantly, when the IRS contacts a taxpayer about a potential compliance issue, it is in a taxpayer’s best interest to contact an experienced tax attorney instead of resorting to self-help, especially if the self-help involves an attempt to deceive the IRS. An experienced tax attorney will work to understand your facts and help you develop a plan to resolve the inquiry by the IRS.
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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 middle market to mom and pop. 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 your business. Do not let the threat of a criminal tax 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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