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Case Reminds California Taxpayers Willful Tax Evasion May Result in Criminal Prosecution at State and Federal Level

Case Reminds California Taxpayers Willful Tax Evasion May Result in Criminal Prosecution at State and Federal Level

A 66-year-old Falmouth, Maine man was recently convicted of eight counts of tax evasion following a jury trial. According to prosecutors, the former poker-chip manufacturing company president paid numerous employees under the table in order to avoid remitting payroll taxes to the appropriate governmental entities. The man apparently diverted income taxes withheld from workers’ paychecks to pay his mortgage, legal fees, country club dues, as well as other personal and business expenses between 2007 and 2012. He also allegedly conspired with at least six workers who previously pleaded guilty to tax evasion or theft of unemployment benefits.


According to a representative for the Maine Attorney General’s office, the man illegally used worker unemployment benefits to maintain payroll for the unreported workers. The employees were allegedly encouraged to apply for unemployment compensation despite that they were still working at the poker chip company. Any additional compensation received by the workers was then paid to the employees off the books.



Due to his conviction, the former company president faces up to 10 years behind bars. Although most of the $165,000 in state taxes that were withheld from workers’ payroll but not remitted to the appropriate authorities has been recovered from other individuals, the man will likely be required to pay about $55,000 in restitution to the State of Maine.


In addition to state prosecution, individuals who choose to evade their payroll and other tax obligations may face criminal prosecution and financial penalties imposed by the United States Government. The Internal Revenue Code requires employers in the U.S. to withhold social security, Medicare, and other taxes from each worker’s paycheck. Those taxes are generally referred to as “trust fund taxes.” Under the Code, anyone who willfully fails to remit an employer’s trust fund taxes to the Internal Revenue Service may be held personally liable for the entire unpaid amount.


Whether or not someone is considered a responsible person under the Code requires a “totality of the circumstances test.” In general, if someone has the authority to pay delinquent taxes, he or she will probably be considered a responsible person by the IRS. Additionally, a responsible individual is typically deemed to have willfully failed to pay any required payroll taxes if he or she knew the taxes were not being paid or demonstrated a reckless disregard for the payment of any trust fund taxes owed by a business.


Because the monetary penalties for failing to abide by U.S. tax laws can be hefty, anyone accused of tax evasion needs an experienced tax lawyer on their side. If you have questions about your obligation to pay federal payroll or other taxes, you should contact San Diego tax attorney William Hartsock through his website. Mr. Hartsock has decades of experience advising clients across Southern California about international and other tax law matters. To discuss your situation with a dedicated tax advocate, please give Mr. Hartsock a call at (858) 481-4844 today.


Additional Resources:

President of closed Falmouth poker chip company convicted of tax evasion, by Scott Dolan, Portland Press Herald



Photo Credit: pennywise, MorgueFile

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