According to a Department of Justice press release, a federal jury recently convicted a Virginia man of failing to pay employment taxes and obstructing the IRS. This story is representative of how severe the consequences can be when a business owner (or someone responsible for the payroll of a company) fails to follow federal employment tax laws. If you have failed to properly withhold, account for, and pay over employment taxes of your employees, you should contact a seasoned employment tax defense attorney to determine your exposure and to help you come back into compliance.
Defendant Withheld Taxes from Employees’ Checks but Failed to Pay Funds Over to the IRS
Court records reveal that a jury in Beckley, West Virginia, convicted Christopher Jason Smyth for failing to pay taxes withheld from employees’ wages and obstructing the IRS. Smyth operated Stat EMS LLC and withheld Social Security, Medicare, and income taxes but did not pay them to the IRS for two quarters in 2016, using the funds for personal expenses and transfers to other businesses. Stat EMS accrued approximately $3.3 million in unpaid taxes.
Smyth faces up to five years in prison for each count of failing to pay taxes and three years for obstructing the IRS. Additionally, Smyth may be sentenced to serve a period of supervised release, commencing upon the completion of any physical incarceration. Lastly, Smyth could be ordered to pay restitution to the IRS, representing the loss tax revenue he caused.
Severe Penalties for Employment Tax Noncompliance
This case underscores the severe penalties for failing to pay employment taxes. You may have read in our prior blogs that the IRS treated employment tax fraud incredibly seriously. This still holds true. The government’s receipt of tax revenue from the withholding from Americans’ paychecks is still the single largest source of tax received by the government. Thus, it should come as no surprise that business owners or those responsible for payroll are held to the highest standard when it comes to compliance matters.
Federal law requires that tax is withheld from employees’ wages, accounted for quarterly, and remitted to the IRS. If you have failed to perform any of these functions, you could have a civil or criminal exposure and should reach out to a knowledgeable employment tax defense lawyer. Together, you will determine the extent of your potential liability and develop a strategy to come into employment tax compliance.
See our Employment Tax Law Q and A Library
