According to multiple local media sources, a Monmouth County, New York business owner has pleaded guilty to tax evasion and failing to pay over employment taxes. One of the key takeaways from this story is the importance that federal and state governments place on the proper withholding, accounting, and paying-over of payroll taxes. If your business is not in compliance with payroll tax laws or has failed to properly withhold or pay over payroll taxes in the past, it is in your best interest to contact an experienced tax attorney to come into compliance.
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Defendant Paid Employees in Cash, Failed to Collect Payroll Taxes
Court documents reveal that Wilson Salas-Molina owned US Contractor Inc., providing roofing services to clients in Monmouth County. Prosecutors alleged that from 2012 through 2018, US Contractor had several employees that it paid wages to but failed to withhold and pay over payroll taxes associated with those wages. In fact, Salas-Molina paid employees in cash after receiving checks from his clients. IRS investigators and DOJ prosecutors estimated that the tax loss from the scheme totaled more than $540,000. It is important to note that the taxing authorities can also prosecute employers that pay their employees in cash without issuing W2s or 1099s as aiding and abetting income tax evasion and or as a conspiracy between employer and employee to defraud the government.
Scheduling is set for later this year. The tax evasion count, as well as the failure to collect, account for and pay over payroll taxes each carries a potential prison sentence of five years. Salas-Molina will likely be ordered to pay restitution and could face a term of supervised release upon his term of imprisonment.
Payroll Tax Compliance and Why It Is Important
Every year, millions of Americans go to work and receive a paycheck. Employers are required by federal law to withhold, account for, and remit federal and state payroll taxes and from their employees’ paychecks. For the lion’s share of Americans, this withholding represents all of the federal income taxes that they will pay for the year. When an employer fails to pay over those amounts, the IRS is very likely losing the practical ability to collect tax revenue for those particular employees.
Many companies have found themselves in a payroll tax predicament. And although companies may believe that falling out of compliance is the end-all-be-all, how you handle the reality of noncompliance drives the company’s future. By consulting with an experienced tax attorney, a company and those responsible parties within it can develop a strategy aimed at coming back into compliance while mitigating some of the potential pitfalls associated with getting right with the government.
Note: It would be a huge mistake during the COVID-19 Pandemic to think the IRS no longer cares about this issue. Do not confuse the temporary extension of time to pay over certain federal payroll taxes and a complete cessation of the duty to withhold and remit federal and California payroll taxes.
Contact an Experienced Tax Attorney Today
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience representing a diverse group of taxpayers. From individuals to middle-market businesses and beyond, our team of zealous advocates will assist in the development of a strategy to help you reach your specific goals and objectives. Whether you are under a tax examination or are in need of tax planning advice, contact the Tax Law Offices of David W. Klasing today, online or by phone at (800) 681-1295, for a reduced-rate consultation.
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