Man Sentenced to Prison for Failing to Remit Payroll Taxes to IRS

Our legal system expects a lot out of small business owners. This system expects these entrepreneurs to follow the rules of their chosen business structure while also making sure they meet all required tax obligations. This is on top of balancing their business plan and making sure they are successful within their market. A failure to balance all these factors can lead to a collapse of the business and can come with steep penalties. If the government can support allegations of tax fraud, these penalties can come with prison time.

A recent case out of Delaware provides an example resulting in both steep monetary penalties and prison time.

On February 14, 2020, David C. Weiss, United States Attorney for the District of Delaware, announced that a 50-year old man (taxpayer), the sole owner of a Delaware company, was sentenced to 21 months in prison for willfully failing to pay more than $1 million in payroll taxes to the Internal Revenue Service (IRS).1Specifically, taxpayer was found to have willfully failed to remit taxes withheld from his employees' paychecks (such as Medicare and Social Security) to the IRS. According to the announcement, he also failed to remit his company's own taxes due and owing.

Attorney Weiss stated that:

The law  requires all individuals and business owners to pay taxes
that are owed to the IRS. Government programs and services on
which we all rely are funded by that tax revenue. Here, the defendant
collected taxes from his employees, but did not pay over those funds
to the IRS. As a result, Social Security, Medicare, and other
government programs had no record of those employees having
properly paid. This prison sentence demonstrates that those who
willfully violate the tax laws and cheat their own employees, all for
personal gain, will be prosecuted to the full extent of the law.

Additionally, taxpayer was ordered to pay restitution in the amount of $1.145 million.

Defenses are available: The case is an example of the penalties that can come with allegations of tax fraud. Those who find themselves in similar situations are wise to act to protect their interests. An attorney experienced in the area of tax law can discuss tax fraud defense strategies and tailor a strategy to your case.

1https://www.oig.dol.gov/public/Press%20Releases/Dover%20Businessman%20Sentenced.pdf

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