I’ve said this before but it bears repeating—especially on Labor Day. If you want to get in trouble with the IRS either withhold payroll taxes and don’t remit them to the IRS or pay your employees under the table (thus not being in compliance with trust fund taxes). Either method starts you quickly on the road to ClubFed.
Thomas Carbo of Wayne, Pennsylvania did the latter. He decided to improve his business’ profitability by paying his employees under the table. He did temporarily save on his payroll tax expense…until he was caught. He ended up defrauding the government out of $168,000.
He was apparently caught as a result of a kickback scheme in nearby Norristown. His business appears to have been a Norristown vendor. The government subpoenaed his records but he didn’t comply with the subpoena; he’s accused of destroying the records instead. The government then investigated, looked at his bank records, and then discovered the tax fraud.
Mr. Carbo has pleaded guilty to one count of conspiracy to defraud and 17 counts of failing to collect and submit the payroll taxes. While he faces up to 90 years in prison and a fine of up to $4.5 million, federal sentencing guidelines suggest he’ll receive a little over two years at ClubFed.