According to a Department of Justice press release, a New England bookkeeper was recently charged with tax evasion and fraud after failing to pay over more than $1 million of withheld payroll taxes to the IRS on behalf of her clients. This story should remind taxpayers who are responsible for the withholding, accounting for, and paying over of payroll tax withholdings that the IRS and Department of Justice take the enforcement of employment-related tax laws extremely seriously and the penalties for noncompliance can be life changing. If you have failed to properly withhold, account for, or pay over employment-related taxes, it is in your best interest to contact an experienced tax defense attorney to determine the best strategy to bring you into compliance.
Defendant Kept Withheld Payroll Taxes Intended for the IRS
Court documents reveal that Patricia Lindau of Newburg, Maine owned and operated a payroll services company, serving companies around New England. Lindau’s services included the withholding of payroll taxes on behalf of her clients. Although many payroll service firms offer this same type of payroll tax services without any problems, Lindau’s company failed to properly pay over a substantial amount of payroll taxes transferred from her clients’ accounts that had been designated for remittance to the government. Although Lindau transmitted phony documentation that funds had been paid over to the IRS, over $2 million had been left unpaid.
Lindau has agreed to plead guilty in exchange for a sentencing recommendation on the lower end of the sentencing guidelines. But even if she is sentenced to the lower end of the spectrum the maximum sentence for wire fraud is 20 years in federal prison. Likewise, the maximum sentence for tax evasion is five years. Additionally, Lindau will likely be sentenced to serve a period of supervised release at the completion of her physical incarceration. Lastly, Lindau has already agreed to pay for the tax loss that she caused, which would have otherwise been ordered in the form of restitution.
Coming into Payroll Tax Compliance Before It’s Too Late
As we have indicated time and time again in our previous blog postings, the IRS and Department of Justice take employment-related taxes very seriously. Payroll withholding taxes are particularly important to the tax system because they represent the mechanism whereby most Americans pay the bulk of their tax bill. Employers are legally obligated to withhold, account for, and pay over payroll taxes from their employees’ paychecks. Failure to do so can lead to an examination, criminal investigation, or as is true in this case, a full-blown criminal tax prosecution.
If you own a business or are in a position responsible for ensuring payroll functions are accurately completed, you are legally required to abide by payroll tax laws. If you have failed to do so or are unsure of your business’ compliance with employment-related tax regimes, you should contact an experienced tax defense attorney as soon as possible. There are methods whereby taxpayers who have fallen behind on their duty to withhold, account for, and pay over employment-related taxes, but as time passes and the IRS gets closer to auditing your business for compliance, the windows of opportunity to clear the matter gradually close. Working with a seasoned tax lawyer, you can establish a strategy and be represented in any interaction with the IRS.
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
