According to a Department of Justice press release, a Long Island, New York man recently pleaded guilty to criminal tax charges related to failing to pay over employment taxes. This story should serve as a reminder to business owners and to those who are responsible for a company’s payroll function that the IRS takes employment tax compliance seriously and severe consequences can follow noncompliance. If you have failed to properly withhold, account for, and remit employment taxes, it is in your best interest to contact an experienced tax defense attorney as soon as possible.
Defendant Paid Employees Under the Table, Paid Significantly Less Payroll Taxes Than Required
According to court documents, Nikolaos Avgoustidis was the owner and operator of the Rocky Point Town House Diner. Additionally, Avgoustidis was responsible for the payroll function at his business. After an investigation, the IRS determined that that Avgoustidis paid many of his employees in cash “under the table”. As a result, he did not pay the appropriate amount of payroll taxes. Plain and simple, if pay your employees in cash and do not 1099 or W2 them for the cash payments you risk being found to have aided and abetted the income tax evasion of those you paid in cash.
In pleading guilty to intentionally failing to pay payroll taxes as required by law, Avgoustidis admitted that he caused a tax loss to the IRS of more than $130,000. Avgoustidis will be sentenced early next year and faces up to five years in prison. Additionally, Avgoustidis will likely be sentenced to serve a period of supervised release and will be required to pay restitution to the IRS.
Understanding the Importance of Payroll Tax Compliance
Payroll taxes serve as the funding mechanism for some of the government’s most important social welfare programs including Social Security and Medicare. Employers are generally required to pay a portion of the payroll taxes associated with an employee, while withheld payroll taxes make up the employee’s portion. It is obvious that employers who take steps to conceal wages paid to their employees and thereby pay less employment taxes that they would otherwise owe garner a great deal of attention from the IRS.
Intentionally failing to pay the correct amount of employment taxes can result in criminal tax charges. If convicted, a defendant can face up to five years in a federal prison. Additionally, a conviction generally comes with a term of supervised release and monetary penalties such as restitution. In addition to a business owner who is likely the individual signing the company’s tax returns, the individual(s) responsible for the payroll function can also be held criminally and civilly liable.
If your business has failed to live up to its legal obligation to properly pay employment taxes, you should contact an experienced tax defense attorney to discuss your options to come into compliance. Working with your tax lawyer, you will establish the facts of your situation, determine the relevant pressure points, and establish a strategy aimed at reducing or eliminating the potential negative effects of employment tax noncompliance.
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.
Our office technology allows clients to meet virtually via GoToMeeting. With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client.
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
