This week’s tax evasion stories share a common theme: the alleged evaders (and those convicted) should have known better.
Let’s start in Sin City, where a personal injury attorney liked cash as a way to conduct his business. There’s nothing wrong with that, but when you don’t declare the cash income and you purchase assets and hide them in others’ names, problems can arise. When the total amount involved is $2 million over six years and there’s a sham child support agreement, it’s trouble with a capital t. Edmund C. Botha was found guilty last week of one count of tax evasion. Based on federal sentencing guidelines, Mr. Botha is looking at about three years at ClubFed plus probable restitution when he’s sentenced in early 2009.
Moving east, Danny Gladden is the former tax collector of Crawford County, Missouri. He was elected in 1991 and soon after discovered a lucrative side job: He embezzled from the county. A state audit discovered the missing funds in 2005, and he was later convicted of theft and sentenced to seven years in state prison. This past week he was convicted of tax evasion. Mr. Gladden forgot that tax must be paid even when the source of your income is stealing. Given that he owed about $82,000 in tax he’s looking at about two years at ClubFed based on sentencing guidelines.
Next, let’s look at two stories that both feature payroll taxes. First, the US Department of Justice calls this “the largest cash wage scheme in Massachusetts history.” Now, there’s nothing wrong with paying employees in cash—it’s completely legal. But you still must withhold payroll taxes, and you still must report them accurately to the government, and you do have to remit them to the appropriate agencies. What happens when you don’t do any of those things? Well, if you get caught, tried, and convicted, and the amount involved is over $43 million, you’ll likely find yourself at ClubFed for a long time.
And that’s exactly what happened to husband and wife Daniel and Aimee King McElroy. About $43 million in payroll was paid under-the-table, with the loss to the IRS being around $10 million and the loss to workers compensation companies was $7 million. In total the husband and wife were each found guilty of 19 counts. The husband was previously sentenced to 108 months at ClubFed; last week the wife received 78 months. They were also ordered to make restitution of $9.1 million.
Our final story comes from Worcester, Massachusetts. Attorney Christopher Uhl allegedly withheld money from his employees’ wages for payroll taxes. That’s good. He also allegedly didn’t remit that money to the federal government. That’s not good. He’s been indicted on six counts of tax evasion and six counts of willful failure to pay taxes.
If you have employees make sure you’re in compliance with payroll taxes. This is not an area to skimp on. Those taxes are called “trust fund taxes,” and the federal government and state governments almost always vigorously go after individuals who withhold but don’t remit. Committing this sort of tax evasion is a losing proposition.
I never could understand why an Employer would think not to send in Other peoples tax payments.