Don't Mess With Taxes

You don’t like the taxes being withheld from your paychecks, but at least you know your tax money is going to fund government services.

Most of the time.

In some cases, those responsible for getting income and other payroll taxes to Uncle Sam don’t comply with their legal responsibility to collect and deliver the funds to the Internal Revenue Service.

Nearly $2.7M unremitted tax: It’s that delivery portion that’s usually the bigger issue. And that’s what a Maryland woman pleaded guilty to today.

The woman, whose name is in the official Department of Justice complaint filed back in January, but which I’m redacting here, was accused of failing to pay nearly $2.7 million in taxes that were withheld from employees’ wages.

The precise amount of $2,663,264.12 represented income taxes, along with the employees’ Federal Insurance Contributions Act (FICA) amounts for Social Security and Medicare. Court records indicated that the withheld taxes didn’t make it to the U.S. Treasury from at least October 2016 through the end of 2021.

Retirement plan embezzlement: In addition, the owner of the now-defunct suburban Baltimore, Maryland, payroll processing company, also admitted that she did not properly pay employee contributions to their company-provided 401(k) plans.

Federal investigators said the retirement plan embezzlement happened in 2007. That year, a total of $207,180.41 in withheld employee contributions was not put into affected accounts.  

She also neglected to make approximately $18,740.37 in employer matching contributions for certain employees, according to court records.

“Failing to forward employee and employer contributions to company 401(k) plans violates employees’ trust and denies workers the opportunity to earn interest on their investments and prepare for their future,” said Norman Jackson, Deputy Regional Director for the Department of Labor’s Employee Benefits Security Administration in Philadelphia, when the original charges were filed against the defendant.

Sentencing in August: Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division announced today’s guilty plea in the employment tax and retirement plan theft case.

He also noted that the defendant is scheduled to be sentenced on Aug. 20, and faces a maximum penalty of five years in prison for both the tax and embezzlement charges. She also faces a period of supervised release, restitution, and monetary penalties.

The IRS Criminal Investigation unit worked with Justice and Labor Departments in investigating the case.

Tax Felon Friday: Unfortunately, unpaid employment taxes are all too common.

They also create a substantial problem, not just for the workers, but also Uncle Sam’s bottom line.

When properly paid, says the Department of Justice’s Tax Division, amounts withheld from employee wages represent nearly 70 percent of all revenue collected by the IRS.

When last measured, the DoJ says employment tax violations represented more than $91 billion of the gross Tax Gap and, after collection efforts, $79 billion of the net U.S. Tax Gap.

If you want to catch up on all sorts of tax miscreants, the ol' blogs' special Tax Felon Friday page is a good place to start.

And if you want more tax crime posts, notably those that were published long before I gave them a special end-of-week feature, you can peruse, what else, the tax crimes category. You'll find this post at the top of that collection right now, so just scroll down for more.

You also might find these items of interest:

• How to get your tax withholding just right
• Payroll taxes: who pays, how much and how if self-employed
• AMT, household help, & payroll tax inflation changes in 2024

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