According to a Department of Justice press release, a New York man pleaded guilty to failing to withhold, account for, and pay over employment taxes after paying many of his employees in cash. This story serves as an example of the serious criminal and civil consequences that can stem from the failure to comply with federal employment tax withholding laws. If you have fallen out of federal employment tax compliance, it is in your best interest to contact an experienced tax defense attorney to help you determine the best strategy to get right with the government.
Defendant Admitted to Paying Employees in Cash, Failing to Collect Payroll Taxes
According to court documents, Sung Soo Chon, of Brookville, New York, was the majority owner and operator of Spa Castle Queens and Spa Castle Texas (located in New York and Texas, respectively). Prosecutors alleged that between 2014 and 2017, Chon paid many of his employees in cash and as a result, failed to withhold all legally required payroll taxes from the wages of his employees. He doubled down by filing false employment tax returns with the IRS. Government investigators estimate that Chon caused the business to conceal more than $1.3 million in cash wages, resulting in an underpayment of nearly $200,000 in payroll taxes.
Chon is scheduled to be sentenced later this year. He faces up to five years in federal prison. Additionally, he could be sentenced to serve up to three years of supervised release, commencing upon the completion of any prison sentence. Lastly, Chon will likely be ordered to pay restitution to the IRS, representing the amount of tax loss that his actions caused.
Coming Into Payroll Tax Compliance with the Assistance of a Seasoned dual licensed Tax Attorney & CPA
As discussed at the outset of this article, the IRS and Department of Justice take payroll tax compliance very seriously. The U.S. federal tax system collects most of its tax revenue through withholding on the wages of employees. Thus, it should come as no surprise that when a taxpayer attempts to turn off that valve of tax withholding flowing to the IRS, serious civil and criminal consequences can result.
U.S. employers are required by law to withhold, account for, and pay over payroll taxes. If you have fallen out of payroll tax compliance or have otherwise failed to properly file a business tax return for one or more years, you should consult with an experienced tax defense attorney. Together, you and your experienced tax counsel will establish the important facts of your case and jointly work toward bringing you into tax compliance.
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.
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Delinquent payroll taxes and trust fund recovery penalty
A payroll tax is a tax that is withheld from an employee’s wage that is in turn paid to the state or to the federal government. The employer effectively acts like a trustee of those funds for the government. The withheld amount is called “trust fund taxes” since it is deemed to be held in trust to the government. IRC § 6672. For this reason, the IRS is particularly aggressive in pursuing payroll tax violations; in practice, it is often more aggressive than pursuing personal income tax violations.
A mistake made in withholding or paying one’s payroll taxes may result in a monetary penalty, but if the IRS is convinced the act was done “willfully”, it will pursue criminal prosecution — which may result in more serious consequences.
Protecting Employers from Personal Liability
If you are a shareholder, business owner or an investor, you could be under investigation by the IRS if your company missed payroll taxes, failed reporting its withholdings or are facing charges of payroll tax fraud. Obtain experienced legal counsel from a highly skilled Los Angeles employment tax lawyer. The IRS will not only go after your company but could also pursue action against you personally. My legal team and I are committed to protecting you from any financial and legal ramifications.
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
