New York City, Long Island, New Jersey, Florida and California Tax Attorneys

Since 1983, our tax firm has skillfully represented individuals and corporations in New York City and Long Island, across the country and around the globe.

IRS goes after small business for payroll taxes: 3 lessons

On Behalf of | Sep 1, 2022 | Business Tax, Criminal Tax Issues, Tax Collection

The Department of Justice (DOJ) recently announced the acceptance of a plea deal with a small business owner from New York. The DOJ states the entrepreneur, who owned and served as the Chief Executive Officer (CEO) of two spas and related businesses failed to properly collect federal payroll taxes from 2014 through 2017. The Internal Revenue Service (IRS) claimed that the owner did not make an error, but instead intentionally worked to conceal more than $1 million in wages shorting the IRS of almost $200,000 in payroll tax obligations.

When faced with the evidence and allegations, the accused chose to accept a plea deal with the government. In exchange, the government likely agreed to drop some of the potential charges. The CEO now faces up to five years imprisonment. The court scheduled sentencing in December.

The case serves as an opportunity to learn from the CEO’s mistakes. Three important lessons that apply to small business owners in New York include:

  • The IRS can look at the past. The most recent of allegations in this example reach back five years. The IRS can look back, it is not limited to the most recent tax returns to move forward with allegations of wrongdoing.
  • Negotiations are possible. The feds likely presented the CEO with a barrage of possible charges. This is a stressful situation that requires careful consideration of all possibilities and experienced negotiation strategies to better ensure the accused is aware of exactly what they are or are not agreeing to during the negotiations.
  • Prison time is possible. A failure to pay taxes can lead to more than just financial penalties. If the government can establish the failure was intentional, they can likely push for imprisonment.

Knowing how far the IRS can dig into past tax matters and having negotiation strategies are important tactics to help reduce the risk of potential prison time. The experienced attorneys at Goldburd McCone can advocate on your behalf, better ensuring a favorable outcome.