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Prison Sentence Waits for Couple Failing to Pay Employment Taxes

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    When Exactly is an Expat Subject to Self-Employment Tax on Foreign Income?Date: 12/03/12

    Topic: Payroll Tax Fraud

    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. Failing to do so will land employers in hot water. Such was the case for James and Theresa DeMuro of Bridgewater, New Jersey. U.S. District Judge Anne E. Thompson recently sentenced the couple to 44 months in prison and three additional years of supervised release after a jury found them guilty of one count of conspiracy to defraud the United States and 21 counts of willfully failing to pay over employment taxes. Furthermore, the couple was ordered to pay restitution to the IRS in the amount of $1,337,953.12.

    Mr. and Mrs. DeMuro reportedly co-owned and operated an engineering and surveying firm called TAD Associates LLC doing business as DeMuro Associates. Evidence revealed at the trial showed that from 2002 through 2008, they withheld employment taxes from their employees’ paychecks but failed to pay more than $546,000 in taxes to the IRS. What’s more, the couple actively tried to prevent the IRS from collecting the unpaid employment taxes by operating under a prior entity that ceased to function.

    According to prosecutors, beginning with the first quarter of 2007 through the last quarter in 2008, the defendants paid employees’ wages and withheld employment taxes but then did not turn over the withholdings to the U.S. Treasury. Worse still, the DeMuros withheld funds from employees’ paychecks for health insurance, child support, and retirement savings accounts that also were never made it to the appropriate entities. The couple instead misappropriated the funds for personal use, racking up more than $280,000 in purchases from QVC, the Home Shopping Network, and Jewelry Television.

    Payroll taxes are considered “trust taxes”, meaning 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. If not paid to the IRS, it is considered stealing from the Federal Government. As a business owner, if you find yourself in a similar or related situation it is important to seek the advice and counsel of a knowledgeable and experienced tax attorney.


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