According to a Department of Justice press release, a businessman from Long Island found himself pleading guilty recently to charges relating to the failure to pay over employment taxes to the IRS. This story serves as a reminder to business owners and operators that the payment of employment taxes is one of the largest sources of tax revenue for the IRS and violations of the laws surrounding them are not taken lightly.
Court documents indicate that Edward Hansen of Northport, New York, pleaded guilty last week to a single count of willfully failing to collect, account for, and pay over payroll taxes to the IRS. Business owners are required by law to withhold payroll taxes from employees’ paychecks. Additionally, they are required to account for the amounts that are withheld on a quarterly basis and pay such amounts over to the IRS.
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Prosecutors alleged that Hansen was the owners and operator of a steel construction business in Suffolk County, New York. In the four-year period between 2008 and 2011, the IRS assessed nearly $500,000 in penalties against Hansen relating to his failure to pay over employment taxes. In an effort to evade the payment of those penalties, in May 2011 Hansen changed the name of his business to BR-Teck Enterprises Inc. and transferred the ownership to another individual. Prosecutors alleged that the transfer of control was all for show as Hansen continued to operate the business and continued to fail to pay over employment taxes withheld from his employees. By June 2017, Hansen had failed to pay nearly $1 million in withheld payroll taxes to the IRS.
Hansen will be sentenced later this year and faces up to five years in a federal prison for failing to pay over payroll taxes, as required by federal law. Additionally, he will likely be sentenced to serve a period of supervised release to begin after his physical incarceration ends. Finally, Hansen will likely be ordered to pay restitution to the IRS and could face additional fines and penalties.
As mentioned earlier in this story, the IRS does not take the failure to pay over payroll taxes lightly. Not only are payroll taxes a large source of revenue for the federal government, but also the payroll tax withholding and remittance mechanism is the link between employees and the IRS. It is the tool whereby the IRS receives most of a wage earner’s tax payment for the year.
If you are a business owner or are responsible for the withholding, accounting for, and remittance of payroll taxes, and you have not been compliant with the relevant state or federal payroll laws, it is in your best interest to contact an experienced tax defense attorney as soon as possible. A seasoned payroll tax lawyer will be able to help you get out in front of the problem and help resolve it before it escalates to a federal prison sentence, as it did in the above story.
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 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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