According to a Department of Justice press release, a New York businessman recently pleaded guilty to failing to pay employment taxes. This story should remind taxpayers who own a business or are responsible for the payroll tax function within a company that there can be severe consequences for those who fail to properly adhere to federal employment tax withholding laws. If you have failed to properly withhold, account for, and pay over amounts withheld from the paychecks of employees, misclassified employees as independent contractors or if you have failed to properly pay payroll taxes, it is in your best interest to contact an experienced tax defense attorney to determine your best options for coming into tax compliance and reduce or eliminate the risk of criminal prosecution.
Defendant Withheld Employment Taxes, But Used Funds for His Own Benefit
Court records reveal that Steven Kwestel of Lawrence, New York, was the owner and operator of Courtesy Transportation Inc. The company provided ambulance transportation services in the Brooklyn, New York area. Between 2013 and 2019, prosecutors alleged that Kwestel properly withheld income taxes from the paychecks of Courtesy Transportation employees, but that he failed to pay over such amounts to the IRS. Instead, prosecutors alleged, and Kwestel admitted, to using hundreds of thousands of dollars of withheld income taxes for his and his family’s own benefit.
The IRS and Department of Justice estimate that Kwestel’s illegal activity caused a tax loss of more than $1.3 million. Kwestel will be sentenced later this fall and could face up to five years in a federal prison. Additionally, he could be sentenced to a period of supervised release to commence upon the completion of his physical prison sentence. Lastly, Kwestel has already agreed to repay $1.2 million to the IRS in the form of restitution, representing the tax loss that he caused.
Recognizing the Seriousness of Employment Tax Exposures and Coming into Compliance
As we have indicated before in previous blog posts, paycheck withholding of federal income taxes is the primary mechanism whereby the federal government collects tax dollars from Americans. Thus, it should be no surprise that when business owners or those otherwise tasked with properly adhering to the employment tax withholding regime fail to do so, that criminal investigators and Department of Justice prosecutors can become involved quickly. Although there are methods whereby a taxpayer who has fallen behind on their employment tax obligations can come into compliance while avoiding a criminal tax prosecution, simply ignoring the problem, or continuing the illegal behavior is not one of them.
If you have failed to properly withhold, account for, or pay over employment taxes, or if you have failed to file a tax return for your business altogether, you should consider contacting an experienced tax defense attorney. Together, you will first determine your level of civil or criminal exposure. Then, you will jointly agree on a strategy to bring you into tax compliance. While you are being represented by a seasoned tax attorney, you won’t have to worry about going up against the IRS alone. Lastly, addressing your or your business’s tax issues means no more losing sleep wondering when the IRS would come knocking.
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.
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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
