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Earlier this week, a Michigan business owner pleaded guilty to willfully failing to pay over employment taxes to the IRS. In similar stories that we have covered relating to employment tax, the offender is typically a business owner that had either failed to withhold or remit employment taxes for a handful of employees. The defendant’s actions in this case are more surprising due to the function of his business.
According to a Department of Justice press release, Dino Rotondo was the owner and operator of four professional employer organizations. These business entities provided payroll services to small and medium-sized businesses. Between 2012 and 2013, Rotondo’s companies withheld over $1.5 million from paychecks from employees of their clients. But when it came time to remit that money to the IRS, Rotondo failed to pay any of the withheld amounts over, resulting in a criminal investigation and calumniating in criminal charges.
During the investigation, the IRS and Department of Justice determined that Rotondo also failed to withhold and remit payroll taxes for his own businesses. Rotondo is scheduled to be sentenced early next and faces up to five years in a federal prison. Additionally, Rotondo faces financial penalties such as fines, penalties, and restitution to the IRS.
There are several particular areas of employment tax that the IRS or state taxing authorities may scrutinize. One such area is misclassifying employees as independent contractors. Many small business owners are under the incorrect impression that if they simply pay workers as independent contractors, the workers are not employees. This simply isn’t the case. State and federal tax law provides a laundry list of factors that are considered when determining the status of labor.
Another pressure point with regard to employment tax enforcement is the failure to pay over withheld employment taxes. Demonstrated in this case, employers have a legal obligation to withhold tax from employees’ paychecks and remit those amounts to the government in a timely manner. The IRS and state taxing authorities are particularly aggressive in pursuing those who either fail to pay over withheld monies or do so in an untimely fashion. In fact, it has been said that the IRS and state revenue agencies will pursue employment tax law violators more vigorously than those suspected of not paying income tax.
Whether you are a business owner desiring assurance that your method being used to withhold and remit taxes complies with legal requirements or you are the target of an IRS or state employment tax examination, it is in your best interest to contact a tax attorney with extensive experience in assisting taxpayers in employment tax-related matters. An experienced tax attorney has a well-respected legal education, combined with knowledge of tax laws and procedure.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience representing taxpayers ranging from individuals to business owners. Our team of zealous advocates is ready to design and implement a strategy aimed at minimizing the potential negative effects of an IRS or state employment or income tax audit. Don’t lose sleep over the possibility of being civically penalized or criminally charged. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
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