Topic: Payroll Tax Fraud
James Clark, a businessman in Kansas City, pleaded guilty to one count of bank fraud and one count of tax fraud. He was ordered to pay over $1.3 million in restitution and was sentenced to 51 months in federal prison for tax evasion and bank fraud. James Clark admitted to withholding payroll taxes from employees of his company, but failed to pay more than $502,000 to the IRS. He diverted the funds and used them for his own purposes, including the operation of the Kansas City Knights basketball team, which he formerly owned.
Failing to pay over withheld payroll taxes is a common ploy of a business man or failing business that is strapped for cash and decides to defraud the IRS (and the EDD here in California) in order to find available cash flow. The taxing authorities are very aggressive in collecting the Trust Fund Liability portion of these payroll taxes relating to employee withholding where the resulting action is purely civil. Where the issue turns criminal you get what happened to Mr. Clark. This is rare but is does happen. Moreover, the corporate veil is pierced in a heartbeat to get at all “responsible parties” by the taxing authorities.