Archive for the ‘Payroll Taxes’ Category

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Attorney Gets Tax Lien, Then Allegedly Commits Tax Evasion

Sunday, July 22nd, 2012

Lee Gottesman is a bankruptcy attorney in Toms River, New Jersey. He is also facing a heap load of tax troubles for some of the usual reasons.

According to the Department of Justice, Mr. Gottesman allegedly created a sub account within his attorney trust account after he had a tax lien filed against him in 2002. That account was for his wife…but his wife supposedly wasn’t a client. Then he allegedly ran all his expenses — both personal and business — through that sub-account. Adding to his troubles, from 2006 through 2009 Mr. Gottesman supposedly didn’t file tax returns…while allegedly earning more than $400,000. According to the indictment, Mr. Gottesman had a CPA prepare tax returns; he just couldn’t be bothered to file them. That’s tax evasion. The indictment noted that Gottesman, “…created and began to use the Sub Account to deposit business income and to pay personal expenses after the 2002 Tax Lien due to his belief that the IRS could not levy the Gottesman [Attorney Trust Account].”

But the reason he likely got into trouble is something that I’ve mentioned over and over again: Withholding payroll taxes but not remitting them. If you do this, you will be investigated. The indictment states, “He [Gottesman] knew that he was required to pay payroll taxes to the IRS, but that he had not.” Given that he allegedly collected (withheld) taxes on his employees but didn’t remit them, that’s a huge mistake. That’s another 15 counts to go with the four counts of tax evasion.

I look at the press release and the indictment and have to wonder. An attorney knows (or should know) the rules regarding taxes. He apparently had good advice from a CPA. He practices in bankruptcy, so he knows that there are alternatives to simply not filing and paying taxes. Yet Mr. Gottesman allegedly committed numerous felonies–and apparently admitted doing so to investigators.

Posted in New Jersey, Payroll Taxes, Tax Evasion | Comments Closed

Now He Gets to Watch Paint Dry

Sunday, July 1st, 2012

Willard Douglas Kerr of Phoenix operated DK Coatings, LLC, a painting and wall covering company in Manassas, Virginia. Mr. Kerr had many employees, and the business was apparently successful.

Mr. Kerr also had some pressing needs at home. He needed a new car. His swimming pool needed repairs. He also wanted to put more money into his business. So he did what you should never, ever do: He didn’t remit his federal trust fund taxes.

As I’ve said over and over, if you have employees and don’t remit your trust fund taxes, the IRS will come after you. It’s only a question of when, not if. If you’re an employer make sure you sign up for EFTPS and check to make sure that your trust fund taxes are being remitted; you will be held responsible if they’re not. That’s why you absolutely positively need to use a reputable payroll company. But I digress….

In any case, Mr. Kerr’s actions were discovered. In April he pled guilty to tax fraud; on Friday he was sentenced to 24 months at ClubFed. He must also make restitution of the $1,111,352 in taxes he owes to the IRS. Now he’ll get to watch the paint he sold dry.

Posted in Payroll Taxes | Comments Closed

Bozo Payroll Tax Scheme Lands Woman in ClubFed

Sunday, June 3rd, 2012

As I’ve said repeatedly, if you want to get in trouble with the IRS simply don’t remit payroll taxes that have been withheld to the government. You are certain to be investigated, and if any wrongdoing is found the investigation will quickly turn into a criminal probe. This story is about a rather

Nasheba Necia Hunte and Elmo Antonio George formed Winco Holdings Inc in Florida. George and Hunte were the only officers of Winco. They had no employees and paid no wages. Yet Winco filed employment tax returns for 2005-2007 showing substantial tax withholdings…withholdings that never happened. They even sent a rubber check for $1,676,991.16 to the IRS for Winco’s non-existent payroll tax obligations. The check was returned, “contact maker for authority to pay.”

The scheme gets more complex. The pair filed corporate tax returns for 2005 and 2006 that had phony partnership losses passing through to the owners as individuals. This generated refunds of $241,807. These funds were deposited into yet another entity, Dikingdom. The funds were used to buy a home in Georgia; George deeded the home to the “Overseer of Dikingdom” and claimed a church owned the property.

Ms. Hunte then made the not-so-brilliant decision to lie to investigators from IRS Criminal Investigation; she told them she wasn’t who she was. She also changed her address to a non-existent address.

In the end, this was all for naught. The pair were arrested for conspiracy to defraud the IRS and were tried and convicted. Both were also found guilty of two counts of filing false tax returns. She was sentenced last week to 51 months at ClubFed and must make restitution of just over $229,000 to the IRS.

My helpful advice to those considering schemes to defraud the IRS related to payroll withholding: Don’t. Sooner or later, usually sooner, the IRS will investigate and your scheme will fall apart.

Posted in Payroll Taxes, Tax Fraud | Comments Closed

On the Bright Side, Lawns Need Mowing at ClubFed, Too

Monday, May 28th, 2012

If there’s been a constant theme in this blog, it’s that if you monkey around with payroll taxes bad things will happen to you. Unfortunately, Michael Cioffi of Loxhatchee, Florida isn’t a reader of this blog.

Mr. Cioffi operated a very successful lawn service; back in 2005-2006 he employed 30 individuals. Mr. Cioffi paid his employees but didn’t withhold any payroll taxes. Sooner or later an employee will file his own income tax return and the issue of social security will arise. If you want to get in trouble, Mr. Cioffi definitely went down the right path.

Undoubtedly, the IRS began an investigation. When they discovered his 2006 return showed just under $800,000 of the over $2 million of gross receipts from his law business, a criminal investigation was a certainty. Mr. Cioffi pleaded guilty to one count of failing to account for and pay payroll taxes and one count of filing a false tax return. He’ll likely get to visit ClubFed in the near future.

Posted in Payroll Taxes, Tax Evasion | Comments Closed

It Only Works Until You Get Caught

Thursday, May 3rd, 2012

One of the recurring themes of this blog is that a business owner must pay his payroll taxes. The government considers Trust Fund taxes to be their money and they will always investigate payroll tax crimes.

Similarly, workers compensation is sometimes run through government and pseudo-government agencies. In California, there is the State Compensation Insurance Fund. The State Fund is a non-profit public-enterprise fund run like a mutual insurance company. However, it was created by the state of California. That makes it a pseudo-government agency. It’s a very bad idea to commit fraud against the government; it’s even worse to get caught.

George Osumi II has a construction business in Irvine. He apparently has his workers compensation insurance through State Fund. Mr. Osumi allegedly had a unique and, if proven, quite illegal method of lowering his insurance costs: He reported on his workers compensation report $3.5 million less in payroll than his actual payroll. That did allegedly save him several hundred thousand dollars in insurance costs. It’s also a felony. And since Mr. Osumi is alleged to have done underreported his wages 18 times, that’s 18 felony counts.

Adding to Mr. Osumi’s problems is that he is also alleged to have withheld state taxes and not remitted them. State tax agencies are just as certain to go after business owners as the IRS if you don’t remit withheld taxes. In total, Mr. Osumi faces 71 felony counts including perjury (he’s alleged to have lied to the State Contractor’s Board in stating that his business did not require workers compensation insurance), identity theft, and a host of state tax charges. Mr. Osumi is looking at up to 63 years in prison if found guilty on all the charges.

News Reports: OC Register, Daily Pilot

Posted in Payroll Taxes, Tax Fraud | 2 Comments »

Cash and Carry Didn’t Work

Saturday, July 23rd, 2011

There’s nothing wrong with paying employees in cash. Indeed, in some industries it’s the norm. However, you still must withhold payroll taxes and properly report the earnings. The owners of a Massachusetts temporary agency found that out this week.

Michael Powers and John Mahan owned Commonwealth Temporary Services, Inc. in Stoughton, Massachusetts. Powers and Mahan believed that if it wasn’t written down or reported, it didn’t happen. Unfortunately for them, the US Department of Justice proved that they paid employees more than $25 million in cash and didn’t report it. They did save $7 million in taxes (and saved more on workers compensation).

But they’re not going to get to enjoy that money; they were convicted of one count of conspiracy to defraud the Internal Revenue Service and their workers compensation insurers, one count of mail fraud and two counts of false tax returns. Instead of making a little less money but complying with the law, they’ll likely pay a lot of fines and enjoy ClubFed.

As I’ve said before, the government takes trust fund taxes very seriously. This isn’t the area to mess around in.

Posted in Massachusetts, Payroll Taxes, Tax Evasion | Comments Closed

I Hope You Enjoyed that $2.4 Million

Monday, July 18th, 2011

I’ve said this before, and I’m certain I’ll say it again: If you want to get in trouble with the IRS, the fastest way to do so is to not remit your federal employment taxes. These are called trust fund taxes, as employers remit money held in trust for the federal government. It’s the government’s money, and they want it.

That lesson has now been learned by Frank Bivings and his wife, Isabelle Blanco. The Washington D.C. residents own the Bivings Group, an Internet communications firm. With 30 employees (according to their web site), they certainly have employment taxes. However, the husband and wife felt that paying themselves larger salaries was more important than remitting those taxes. According to the Department of Justice, $1.8 million of the $2.4 million that wasn’t remitted were federal trust fund taxes. It’s probable the rest were local (District of Columbia) taxes, and that’s nearly as bad: The District is federal land.

Mr. Bivings pleaded guilty to one count of failing to pay employment taxes; Ms. Blanco pleaded guilty to one count of failure to pay a tax. Mr. Bivings’ charge is by far the more serious; he’s looking at a stay in ClubFed of 30 – 37 months. Ms. Blanco is likely to receive probation. The husband and wife have agreed to make restitution of the unpaid employment taxes.

I’ll repeat this again: Make sure that when you collect federal trust fund taxes that you remit them.

Posted in IRS, Payroll Taxes | Comments Closed

Another Reason Why You Should Check That Your Payroll Tax Deposits Are Being Made

Sunday, January 31st, 2010

Let’s head to North Tonawanda, New York (near Buffalo). Vicnent Mangione allegedly had a nice tax and payroll business. The Department of Justice alleges that Mr. Mangione had a different method of handling payroll taxes than what you and I would expect. Assistant US Attorney Michael DiCiacomo told the Buffalo News,“Unbeknownst to the businesses, Mangione would secure from the businesses the proper amount of quarterly tax due to the IRS and then submit a false tax return on behalf of the business that underreported the amount of tax due,” DiGiacomo said. “According to the indictment, Mangione would then keep the difference for his personal use.” Mr. Mangione, through his attorney, denies any wrongdoing.

No matter if you use a payroll service or not, check to make sure that the government is receiving your payroll tax deposits. You are liable for your trust fund taxes, and the government always comes calling if they don’t receive the funds.

Posted in Payroll Taxes | Comments Closed

Witholding But Not Remitting Leads to ClubFed

Sunday, December 20th, 2009

If there’s been a recurrent theme in this blog, one has been if you don’t pay your Trust Fund taxes you will get in trouble. Such trouble hit Michelle Bielaski of Bellevue, Washington.

Ms. Bielaski’s company, Falcon Construction, Inc., paid $3.9 million in salaries between 1997 and 2007, and should have paid $2.4 million to the government for Trust Fund Taxes (Medicare, Social Security, and Federal Income Tax) but didn’t. If you live what the US Attorney calls an expensive lifestyle and get caught—and almost everyone who evades payment of Trust Fund taxes gets caught—you almost certainly will get to visit ClubFed.

Such is the case for Ms. Bielaski. She pleaded guilty last June, and found out last week that she’ll spend 15 months at ClubFed. She must also make restitution of the $2.4 million. As usual, it’s a whole lot easier to pay now then to pay later.

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Posted in Payroll Taxes | Comments Closed

California’s Other $17.8 Billion Deficit

Thursday, June 4th, 2009

California currently has a $24 billion budget deficit. Would you be surprised to learn that there’s another $17.8 billion budget deficit on top of the current budget fiasco?

It’s true.

California has had a major problem with the funding of unemployment insurance for years. Unemployment benefits are paid for through taxes on employers: the FUTA, SUI, and ETT taxes. FUTA is the Federal Unemployment Tax; SUI is the State Unemployment Insurance Tax; and ETT is the California Employment and Training Tax. FUTA is generally $56 a year per employee while SUI and ETT totals $160 to $350 a year per employee. At the end of 2008 the fund had a slight surplus, but had been in deficit funding in prior years.

It was in poor shape because Democrats in California’s legislature increased benefits (which they could do with a majority vote) but didn’t increase taxes (which takes a 2/3 vote). Increased spending led to the usual result: an increase in the deficit of the unemployment insurance fund.

The problem has ballooned in 2009 with the increase in unemployment. The San Francisco Chronicle is reporting that the fund is solvent only because of borrowing $17.8 billion from the federal government. Unfortunately, the federal government wants to be repaid and if the fund doesn’t become solvent that’s impossible. Governor Schwarzenegger proposed an increase in the SUI tax along with a decrease in benefits. The measure has not been heard; frankly, there’s no chance of any tax increase passing in the legislature this year.

So California continues to drift towards fiscal Armageddon. Given the likelihood of even more unemployment in coming months this is a problem that will have to be resolved sooner than later. If California does nothing, the federal government can impose higher FUTA taxes on California employers. If that happens employers will certainly choose to increase employment in other states if they have that option.

Posted in California, Payroll Taxes | Comments Closed

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