Former NJ nursing home magnate pleads guilty to $38 million tax fraud
Friday, November 22, 2024
Every worker is aware of payroll taxes. These amounts are taken out of paychecks and then sent by your boss to the various appropriate state and federal tax agencies.
At the federal level, the primary payroll reductions cover income taxes, as well as Federal Insurance Contributions Act (FICA) amounts that are paid by both employees and employers to fund Social Security and Medicare.
While it’s our earnings that are involved, when it comes to payroll taxes it is our bosses that are responsible for getting the correct amounts to Uncle Sam.
When that doesn’t happen, a company and/or its owner can face serious financial and legal consequences. Failure to remit payroll withholdings or make late payments can result in hefty fines and, if the tax responsibility continues to be shirked, potential tax liens and even bring criminal charges.
That last worst-case eventually is what happened to a former nursing home mogul, who this week pleaded guilty to participating in a $38 million employment tax fraud scheme.
Guilty pleas for tax, retirement plan violations: Joseph Schwartz, a 64-year-old insurance broker from Suffern, New York, was initially indicted in 2022 on 22 counts of allegedly failing to account for and pay federal taxes collected on behalf of employees at N.J.-based Skyline Management Group LLC.
Schwartz also was an operator of Skyline, which at its peak operated more than 90 nursing homes in 11 states. Federal prosecutors have said Skyline’s IRS debt was a contributor to the company’s collapse.
On Monday, Nov. 18, Schwartz pleaded guilty in U.S. District Court in Newark, New Jersey, to two counts from the federal indictment.
The tax charge to which he entered his first guilty plea accused him with willfully failing to remit employment taxes withheld from employees of his company.
Court documents alleged that from October 2017 through May 2018, Schwartz caused taxes to be withheld from employees’ pay, but failed to then pay over more than $38 million in employment taxes to the IRS.
Schwartz also admitted in court to willfully failing to file an annual financial report with the Department of Labor for the employee 401(k) Benefit Plan his company sponsored.
As an administrator of the Skyline 401(k) plan, prosecutors said Schwartz had an obligation to file an annual Form 5500 financial report with the U.S. Secretary of Labor for calendar year 2018, but knowingly and willfully failed to file the report.
Guilty plea, take two: This week’s court appearance was Schwartz’s second on the same charges. He admitted his guilt to those offenses in January.
However, in May the presiding judge rejected the plea agreement, under which Schwartz would have faced a year and a day in prison and paid $5 million in restitution.
Schwartz’s second pleas to the charges came as he was awaiting trial. Now, under this second arrangement with federal prosecutors, the judge isn’t bound to follow the six to 18 months of jail time typically recommended in a formal plea agreement.
Schwartz will learn how much jail time he will get and what financial compensation he will be ordered to pay at his sentencing, scheduled for April 10, 2025.
The employment tax fraud count is punishable by a maximum penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense, whichever is greatest.
The failure to file a Form 5500 related to the retirement plan count carries a maximum potential penalty of 10 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense.
Success of multi-agency investigation: “Schwartz ran a vast, multistate nursing home empire, but cheated taxpayers out of more than $38 million so he could line his own pockets,” said U.S. Attorney Philip R. Sellinger following the defendant’s pleas. “Having admitted his crime, he will now be held accountable.”
He also reaffirmed his office’s commitment to working with law enforcement partners to prosecute participants in tax fraud schemes.
In the Schwartz case, Sellinger credited it successful resolution to IRS Criminal Investigation special agents, under the direction of Special Agent in Charge Jenifer L. Piovesan in Newark; and investigators with the Department of Labor-Employee Benefits Security Administration, under the direction of Regional Director Thomas Licetti in the New York Regional Office; and special agents of the FBI, under the direction of Acting Special Agent in Charge Nelson I. Delgado.
Tax Felon Friday: Failure to pay employment taxes is an all too common offense.
Sometimes, companies are not clear on this being the boss tax basic. Other times, it’s not an innocent oversight, but as in the Schwartz case, a willful, and costly decision.
If you’re a business owner with employees, including sole proprietors with just themselves on the payroll, check out the IRS’ special Understanding Employment Taxes webpage.
You also can catch up on tax miscreants who have been charged and/or convicted of employment and other tax crimes at the ol’ blog’s special Tax Felon Friday page.
And if you want more tax crime reports, notably those that were published long before I gave them a special end-of-week feature moniker, in where else, the tax crimes category. This post is at the top of that collection right now, so just scroll down for more.
You also might find these items of interest:
- Payroll taxes: who pays, how much and how if self-employed
- IRS warns of fake Self Employment Tax Credit claims touted on social media
- Employee or contractor classifications and other employment tax tips for businesses
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