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as the irS continues to increase collection
efforts, business owners should be wary of
any acts that could be perceived as efforts

to evade reporting or paying employment-
related taxes. Smart business practices
would be to never use taxes withheld from an
employee’s check for any purpose other than

its intended use.

to avoid the assessment and/or pay- An example of this sort of prosecution A recent example of this trend

ment of his or her tax.
occurred in the case of United States
involves Richard Whatley, who was the
v. James and Theresa DeMuro. The owner of multiple staffing companies

Affirmative Act: The actual comple- DeMuros operated an engineering and in utah. The prosecution contended
tion of a voluntary and intentional act surveying company out of New Jersey. that Whatley’s actions in failing to turn
in order to avoid one’s known legal The evidence at their trial showed that over payroll taxes from 2001 to 2006

income tax responsibility including they withheld more than half million resulted in a loss of more than $2.3 mil-
the assessment and/or the payment of dollars from their employees’ checks lion in tax revenue. Whatley ultimately

a tax.
but failed to turn over this money to the entered into a plea agreement and was
IRS. They also had attempted to evade sentenced to 51 months in prison for

Intent/Willfulness: Any effort or tax responsibilities by shutting down a willfully failing to pay employment
attempt to avoid the assessment and/ different company in what the govern- taxes to the IRS. he was also ordered to

or payment of a tax. Examples of acts ment believes was a strategy to evade pay a fine of $541,513.
which may constitute criminal intent in payment of unpaid employment taxes As the IRS continues to increase

this regard may include:
for that entity. The convicted couple collection efforts, business owners
also withheld money from employees’ should be wary of any acts that could
• filing a false tax return
checks for health insurance, retirement be perceived as efforts to evade report-

• Creating false records such as
accounts, and child support, but they ing or paying employment-related
invoices and receipts
failed to provide these funds to the ap- taxes. Smart business practices would

• Deliberately destroying records
propriate agencies or accounts.
be to never use taxes withheld from an
• Making false statements to an
After a jury found them guilty of employee’s check for any purpose other

IRS agent
willfully failing to pay employment than its intended use. If a small busi-
• Claiming false deductions
taxes to the IRS, the DeMuros each ness owner or other decision makers

• Concealing bank accounts and/
received 44-month prison sentences have already failed to turn over with-
or assets
and were ordered to pay restitution of held employee funds, the owner and

• Cash structuring
$1,337,952.12 to the IRS.
decision makers should immediately
Another emerging trend in tax pros- contact a qualified tax professional to
While a “debtor’s prison” does not ecutions is the increase in prosecutions take immediate steps to correct past

exist in the united States, an emerging against staffing companies and PEos mistakes and provide protection from
trend in tax prosecutions is indicting (Professional Employment organiza- the long arm of the law.

business taxpayers who have taken tions). These types of companies often
affirmative action to avoid payment of handle the processing of payroll for
Norman McKellar is the founder of The McKellar Law Firm,
payroll taxes. The government views their clients—usually small businesses.
failure to provide payment for payroll These staffing companies and PEos are PLLC, and the winner of multiple Cityview Top Attorney
awards. His practice primarily deals with IRS tax resolutions
taxes as theft, as the employer has also required to pay payroll taxes to the
taken money from an employee and IRS, and when the companies do not and federal criminal defense. More information on his law
irm can be found at www.HelpingClients.com, or follow him
failed to pay the withheld amounts to satisfy this requirement, they too can
the IRS.
face criminal prosecution.
on Twitter @McKellarLawFirm.

may june 2014 cityviewmag.com 135