A Department of Justice press release revealed that three siblings from Louisiana recently pleaded guilty to tax fraud after failing to pay over employment taxes withheld from the paychecks of their employees. This story should serve as a reminder to business owners and those who are responsible for a company’s payroll function. Violations of the nation’s payroll tax laws generally draws a tremendous amount of attention and can result in severe civil and criminal liability. If you have fallen out of payroll tax compliance or have failed to comply with other federal income tax laws, it is in your best interest to consult with an experienced tax defense attorney to determine the best strategy to come into compliance without facing criminal tax prosecution.
Defendants Were Accused of Failing to Pay Over Withheld Payroll Tax
We first brought you the facts of this story earlier this year. If you recall from our previous story, David Farrell and Dawn Farrell Ruiz were accused of conspiring to defraud the IRS. The two, along with another defendant, Matthew Reck, who recently pleaded guilty, were responsible for operating the SES Construction Consulting Group and Global Technical Solutions. Reck was the co-owner of the two businesses while Farrell and Ruiz worked as project manager and bookkeeper, respectively. The three are accused of underreporting the income that they earned from the business on their individual income tax returns.
Additionally, Reck pleaded guilty to, and Ruiz is accused of causing the businesses to file false corporate income tax returns. According to the indictment, some employees were paid in cash or “under-the-table”. Thus, workers’ compensation was not reported to the IRS. When approached by investigators from the IRS, Reck is accused of lying about his relationship with the accountant for the two businesses.
In addition to guilty pleas from David Farrell and Dawn Farrell Ruiz, their brother, Randy Farrell, also pleaded guilty to charges related to concealing money from the IRS. Each defendant faces up to five years in prison. Additionally, the siblings may be sentenced to serve a period of supervised release, commencing upon the completion of their physical incarceration. Lastly, the defendants will likely be ordered to pay restitution to the IRS, representing the amount of tax loss that they caused.
Appreciating the Seriousness of Payroll Tax Law Violations
The defendants from the story above now likely understand the severity of failing to comply with employment and income tax laws. When employers withhold taxes from the paychecks of employees, they are partaking in the largest single-source of revenue collection for the nation. Thus, it is not hard to fathom why the IRS and Department of Justice come down so hard on taxpayers who fail to properly account for, and remit amounts that were withheld. Like many other aspects of tax compliance, the further a taxpayer falls behind, the harder they feel that it is to catch up. Luckily, an experienced payroll tax attorney can provide some much-needed relief.
If you have fallen behind on your payroll or income tax obligations, a seasoned tax attorney will work with you to understand the pertinent facts and circumstances of your case. Then, you will jointly determine the proper route to get you right with the government. Sometimes, the right path involves amending returns and making the correct payments in full, whereas sometimes the proper avenue to come into compliance involves discussions with the IRS. In either event, you will not have to go up against the government alone while being represented by an experienced tax attorney.
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
