Failing to remit withheld taxes to the IRS is one of the most common employment civil & criminal tax offenses, yet many business owners underestimate the consequences. The Department of Justice recently announced that Dean E. Dawson, owner of Real Property Consulting Group LLC, was sentenced to 18 months in prison for willfully failing to pay over employment taxes. If you have used business funds to cover personal or business expenses instead of paying employment taxes, it is imperative to consult a tax attorney immediately to help get right with the federal or state governments.
Dawson Withheld Taxes but Spent Them on Personal Expenses
Court documents reveal that Dawson’s real estate appraisal business collected Social Security, Medicare, and income taxes from employees’ wages from 2015 through 2022. Instead of remitting those funds to the IRS, Dawson diverted them for personal use, paying credit card bills, his wife’s home mortgage, and issuing checks to his wife even though she was not an employee. The timely payment of employment taxes is critical because the funds support federal programs like Social Security and Medicare.
Investigators also discovered that Dawson did not file personal income tax returns or pay taxes from 2018 through 2023. In total, he caused a tax loss of approximately $525,000. The district court judge ordered Dawson to pay $430,527 in restitution plus interest, and he will be subject to three years of supervised release after serving his 18‑month prison term.
Personal Use of Payroll Taxes Constitutes Embezzlement and Tax Evasion
Employers act as fiduciaries when they withhold taxes from employees’ wages. Using withheld taxes for personal or business expenses constitutes not just a failure to pay but essentially an embezzlement of federal or state funds. The federal & state governments view this conduct as particularly egregious because it undermines the trust funds that finance critical social programs. Under the Internal Revenue Code, willful failure to collect or pay over taxes can result in felony charges with penalties of up to five years in prison and heavy fines.
Dawson’s sentence underscores that courts will impose incarceration even when defendants eventually pay some restitution. By also failing to file personal tax returns, Dawson compounded his liability and provided additional evidence of willfulness. Business owners should understand that the IRS can hold them personally responsible for trust fund recovery penalties equal to 100 percent of the payroll taxes not remitted, in addition to any criminal penalties.
Addressing Payroll Tax Delinquencies Before They Become Criminal
If your business is behind on payroll taxes, you should act immediately to correct the problem. The IRS & state tax authorities have robust collection tools, including liens, levies, and the ability to file criminal charges. A tax attorney can negotiate payment plans, represent you in collection due process hearings, and attempt to help you avoid personal liability under the trust fund recovery penalty.
Proper record‑keeping and timely filing are essential. Many payroll issues arise because business owners delegate payroll to third‑party providers without oversight. Regular audits, reconciliations, and consultation with tax professionals can prevent mistakes and uncover fraud. Our firm can assist you in establishing compliant payroll systems and communicating with the IRS to resolve delinquencies before they lead to criminal charges.
We Are Here for You
The Tax Law Offices of David W. Klasing represent business owners nationwide in employment tax matters, including audits, appeals, and criminal tax investigations. Our Employment Tax Attorneys and CPAs have the experience to navigate complex payroll tax issues and craft solutions tailored to your business.
Do not let payroll tax problems jeopardize your business or your freedom. Contact us today to schedule a confidential consultation and learn how we can help you come into compliance and protect your assets.
