Call Now (800) 681-1295

New York Business Owner Pleads Guilty to Payroll Tax Fraud

Table of Contents


    According to a Department of Justice press release, a New York business owner recently pleaded guilty to payroll tax fraud after paying his employees under the table. This story should serve as a reminder to business owners and others who work within a payroll function that the laws requiring employers to pay payroll tax on the wages paid to employees is inflexible in the sense that they cannot be legally avoided by paying employees in cash. In fact, paying employees in cash opens up a business owner to far more problems and potential legal exposures than most would think. If you have paid your employees under the table, or have otherwise failed to comply with payroll tax laws, it is in your best interest to contact an experienced tax defense attorney to establish a strategy to come into tax compliance.

    It is also possible to be criminally charged with aiding and abetting income tax evasion and conspiracy to defraud the federal government if you pay your employees in cash that is additionally not appropriately included on a W2 or a 1099 as it encourages your employees to fail to report their cash basis wages for income tax purposes. This can also result in defrauding your workers compensation insurance company as most premiums are calculated based on reported wages. Exposure is exponentially increased if the workers paid in cash, are additionally illegal aliens.

    Defendant Paid Employees in Cash, Admitted to Dodging Payroll Taxes

    Court records reveal that Anthony Riccio was the owner and operator of AD Custom Interiors Inc. Between 2011 and 2016, Riccio admitted to cashing over $3 million in checks written to AD Custom Interiors and instead of depositing the cash into a business bank account, he used some of the funds to pay his employees in cash. When AD Custom Interior’s tax preparer requested information about the previous year’s wages, Riccio did not make note of the wages that he had paid under the table. This omission resulted in a dramatic underpayment of payroll taxes which would include income, Social Security, and Medicare taxes.

    Riccio is scheduled to be sentenced in the fall. He faces up to five years in federal prison. Additionally, he could be sentenced to up to three years of supervised release, which would commence upon the completion of his physical incarceration. Lastly, Riccio will likely be ordered to pay restitution to the IRS, representing the tax loss that his illegal activity caused.

    Bringing Your Business into Payroll Tax Compliance

    The defendant in the story above is learning that the easiest business solution is not always the most beneficial in the long run. Paying employees in a manner that is outside an established payroll system can result in a host of tax and non-tax exposures. The IRS recognizes that paying employees in cash is the number one reason for businesses being noncompliant with their payroll tax obligations. Because payroll tax and employment-related tax withholdings are the IRS’s biggest source of tax revenue, IRS Criminal Investigations team and Department of Justice come down particularly hard on those who intentionally skirt payroll tax regulations.

    If you own a business or are responsible for overseeing the payroll function of a business, it is critical that you remain in payroll tax compliance. If your business has paid employees in cash or if your business has withheld employment taxes from the paychecks of employees but failed to remit those withholdings to the IRS, you may have a looming civil and criminal tax exposure. Working with an experienced tax defense attorney, you will establish the severity of any exposure and then work to establish a strategy to minimize or eliminate the exposure.

    BBB Rating

    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.

    Our office technology allows clients to meet virtually via GoToMeeting. With end-to-end encryption, strong passwords, and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client. 

    Questions about delinquent payroll taxes and trust fund recovery penalty

    Tax Help Videos

    Representing Clients from U.S. and International Locations Regarding Federal and California Tax Issues

    tax lawyers

    Main Office

    Orange County
    2601 Main St. Penthouse Suite
    Irvine, CA 92614
    (949) 681-3502

    Our headquarters is located in Irvine, CA. Our beautiful 19,700 office space is staffed full-time and always available for our clients to meet with our highly qualified and experienced staff of Attorneys, Certified Public Accountants and Enrolled Agents. We also offer virtual consultations and can travel to meet with clients in one of our satellite offices.

    Outside of our 4 hour initial consultation option, we do not charge travel time or travel expenses when traveling to one of our Satellite offices, or surrounding business districts, where it is necessary to meet personally with taxing authority personnel, make court appearances, or any in person meeting deemed necessary for the effective representation of a client. To make this as flexible, efficient, and convenient as possible, David W. Klasing is an Instrument Rated Private Pilot and Utilizes the Firms Cirrus SR22 to service client’s in California and in the Southwest by air. Offices outside these areas are serviced via commercial jet airlines. None of these costs are charged to our clients.

    Satellite Offices

    (310) 492-5583
    (760) 338-7035
    (916) 290-6625
    (415) 287-6568
    (909) 991-7557
    (619) 780-2538
    (661) 432-1480
    (818) 935-6098
    (805) 200-4053
    (510) 764-1020
    (408) 643-0573
    (760) 338-7035
    (602) 975-0296
    New Mexico
    (505) 206-5308
    New York
    (332) 224-8515
    (512) 828-6646
    Washington, DC
    (202) 918-9329
    (702) 997-6465
    (786) 999-8406
    (385) 501-5934