Posts Tagged ‘payroll taxes’

Tax Roundup, 7/23/2012: Chasing smokestacks, catching smoke. Also: final film credit trial starts; 1040s and summer homes.

Monday, July 23rd, 2012 by Joe Kristan

So the guy who swindled customers in his commodity brokerage in Cedar Falls also swindled Iowa “economic development” smokestack chasers.  From and AP (via State 29):

Even before its dramatic collapse last week, an Iowa-based brokerage implicated in a $200 million fraud scandal had defaulted on the terms of a $1.24 million state incentives package that helped the firm build a state-of-the-art headquarters, newly released records show.

The Iowa Economic Development Authority warned Peregrine Financial Group, Inc. in March that it had violated its contract by paying employees lower salaries than promised and must pay back some of its aid immediately, according to a letter released in response to a request from The Associated Press.

It’s yet more evidence for what I’ve long said about “economic development incentives”:

When Iowa tries to pay other businesses to come here, it’s like a guy who brings his wife’s purse into a bar to buy drinks for the girls. The girls aren’t impressed, and any he does pick up aren’t worth much.

That’s something Iowa should ponder before it signs the check to bribe a fertilizer plant to locate in Iowa with tax money paid in part by competing fertilizer plants that are already here.

Who pays the bills? The Tax Foundation has a map showing the Percentage of Federal Income Tax Revenue from Filers Making Over $200,000:

Airball. The former owner of a Kansas City minor league basketball team will go away for 51 months for crimes that included not remitting payroll tax withholidngs, reports

James Clark, 53, of Overland Park, a former owner of the Kansas City Knights basketball team, pleaded guilty to one count of tax fraud and one count of bank fraud. Clark admitted that he withheld payroll taxes from employees of his company, SWISH Holding Corp., while failing to pay more than $502,000 to the Internal Revenue Service. He diverted the funds and used them for his own purposes, including the operation of the basketball franchise.

Many people think that they are just “borrowing” money when they fail to remit withheld taxes.  It can be tempting when suppliers are howling for cash.  This case shows that failure to remit withholdings can have consequences much more serious than cash late penalties and interest.

 The last scheduled trial of an Iowa film tax credit fiasco figure is slated  to start today.  Chad Witter, an accountant who worked as a middleman in obtaining and marketing film credits, will go on trial in Polk County District Court on charges of theft, fraudulent practice and ongoing criminal conduct.  Dennis Brouse, a producer who worked with Mr. Witter, was sentened to ten years in prison earlier this year on charges arising out of the disastrous program to bribe filmmakers to come to Iowa with transferable tax credits.

How Government Limits Upward Mobility (Howard Gleckman, TaxVox):

True, social welfare programs provide a valuable safety net for the very poor. For instance, the Earned Income Tax Credit and the Child Tax Credit are important income supports for low-income families.

But because these safety net programs phase out as incomes rise, some people face marginal tax rates as high as 80 percent for getting a better job or even a raise.  A new Urban Institute calculator shows how this works.

Related:  Taxing the heck out of the top 400 taxpayers won’t help the bottom 20 million

Will your 1040 help pay for your vacation home? My latest post at, the Des Moines Business Record group blog for entrepreneurs.

WSJ: IRS Audit of Romney Donor Raises Questions About Presidential Enemies List (TaxProf Blog)

Jana Luttenegger, Summer Camp Tax Credits (DavisBrown Law Firm Tax Blog)

Or somewhere darker: The IRS Art Advisory Panel Has Its Head In The Clouds (Janet Novack)

Kay Bell, Bicycling commuters, you might qualify for a tax-free workplace benefit

Russ Fox, Two Sets of Books Aren’t Better than One.  At least when  one set doesn’t include the skimmed receipts.

Jason Dinesen, Medicare Part B and Same-Sex Married Couples

Jack Townsend, Form 8938 Resource

Peter Reilly wades into the swamp of the tax treatment of Scientology.

TaxGrrrl, Saban Suggests Penn State Tickets Should Be Taxed To Pay For Scandal.  I read that as “Satan” at first.

News you can use: The General Crapiness of Your Life Does Not Relieve You of Your Tax Obligations (Anthony Nitti)

Robert D. Flach will save $11,000 in taxes annually by fleeing New JerseyHe’s getting paid to do something most of us would be happy to do for free.

Help Wanted: The Hunt for a New Going Concern Freelancer Goes OnIf you have a Big 4 bad attitude, what are you waiting for?


Eight years or Eighty, the IRS still wants its money

Thursday, February 23rd, 2012 by Joe Kristan

Jeffrey Sykes’ victims may have gotten grim satisfaction yesterday when he received an 8-year sentence for stealing withheld taxes from his payroll service. Still, grim satisfaction doesn’t help them get right with the IRS.
Mr. Sykes’ payroll tax service had about 1,100 clients, according to reports. Instead of using client money to pay their payroll tax obligations, he apparently spent it on a more important obligation: himself.
Unfortunately, the IRS still wants the money. The victims get to pay their payroll taxes twice: first to Mr. Sykes, and then to the tax man. That’s why employers should sign up with the Electronic Federal Tax Payment Service. Even if you outsource your payroll, EFTPS lets you go online to make sure that your provider is remitting your tax deposits on time. These online visits should be part of your internal control routine, because nobody can really afford to pay payroll taxes twice.
Prior coverage: Payroll outsourcing: trust (a little), but verify (a lot).


Court orders eastern Iowa employer to pay those payroll taxes

Friday, February 3rd, 2012 by Joe Kristan

It’s never wise to fall behind on your payroll taxes. The IRS is stepping up the pressure on a Bettendorf businessman that it says owes payroll taxes. From a Justice Department press release:

A federal court has ordered James Watts and eight corporations to begin paying employment taxes to the United States on a timely basis, the Justice Department announced today. According to the government complaint in the case, Watts, of Bettendorf, Iowa, is the president of Watts Trucking Service, Inc., an Iowa corporation, of which the other seven corporations are subsidiaries. The complaint alleges that the companies fail to pay over to the Internal Revenue Service (IRS) all of their employment and unemployment taxes, including the income and social security taxes withheld from their employees


IRS cuts Iowa City a break on late payroll tax deposit

Thursday, January 5th, 2012 by Joe Kristan

The IRS fined Iowa City schools $25,000 for making their payroll tax deposit a day late, but Going Concern reports that the IRS has waived the penalty. No word on whether it had anything to do with former IRS attorney Michelle Bachman being in the state, now with time on her hands.
It’s hard to get late payment penalties waived, and they add up in a hurry, so make sure you stay current.


That’s an expensive loan

Tuesday, November 22nd, 2011 by Joe Kristan

Sometimes employers who fail to remit payroll taxes they withhold from employee paychecks think they are just taking a sort of unauthorized loan — merely paying one vendor late to pay more pressing bills. That’s a poor way to look at it. From

Federal officials sentenced a Lorton man Friday to 18 months in prison after they said he didn


IRS: Davenport trash hauler owes $30 million in payroll taxes

Wednesday, September 28th, 2011 by Joe Kristan

The IRS says an Eastern Iowa trash hauler has failed to remit millions of dollars of payroll taxes withheld from employees. From

In the complaint filed by the Internal Revenue Service against Jim Watts, it says Watts and his companies are required by law to withhold employment taxes for both employees and the employer. However, the documents say since at least 1990, employees of Watts’ companies fill out the required tax forms, the money is taken out of their paychecks, but the money is not paid to the government.
The documents show how over the years, the amount owed to the government adds up to more than $30-million dollars.

The IRS is seeking a court order to force the payment of current and allegedly delinquent payroll taxes. $30 million is a lot of money, but if he somehow hasn’t been remitting payroll taxes for 20 years, it can add up in a hurry, especially with interest and penalties.
The bad thing about failing to remit payroll taxes is that company owners and “responsible persons” can be held personally liable for the unpaid amounts. Worse, the IRS can turn failure to remit taxes into a criminal case.


You can’t afford to fall behind on your payroll taxes

Monday, August 1st, 2011 by Joe Kristan

Falling behind on payroll taxes is often fatal for small businesses. Arden Dale explains atSmartMoney Tax Blog:

Once the IRS adds its penalties, the debt can snowball. Companies can be fined for outright failure to pay or to report on the tax, and also for paying late


Illinois man didn’t remit his withholding, gets 11 years to think it over

Wednesday, May 11th, 2011 by Joe Kristan

If you really want to get on the bad side of the tax man, withhold taxes from your employees and then don’t pass them on to the IRS. Not only are you personally on the hook for them pretty much forever, but the IRS can also put you in prison for it.
An 54-year old Illinois construction contractor learned this lesson the hard way this week when he was sentenced to 11 years behind bars. The Northwest Herald reports:

John M. Volpentesta, 54, formerly of Marengo, was convicted in July in federal court on two counts of mail fraud, two counts of wire fraud, 11 counts of failing to pay taxes he withheld from the wages of his employees to the Internal Revenue Service, three counts of failing to file unemployment tax returns, and three counts of failing to file personal income tax returns.

Mr. Volpentesta may have made a whole series of unwise choices, not least by being his own lawyer. But he may be a slow learner:

“The court has observed the defendant’s actions, expressions and demeanor while testifying in this court, and in this court’s estimation, the truth for the defendant has very little connection to reality or actuality,” Kapala wrote. “The truth in the defendant’s mind had been perverted to mean whatever profits or benefits him, as he is unfettered by any desire or sense of moral obligation to tell the truth.”

The moral? Remit your payroll taxes, even if you have to stiff all of your other creditors. Oh, and make sure your lawyer doesn’t make a bad impression on the judge — especially if your lawyer is you.


Trust, but verify

Tuesday, February 1st, 2011 by Joe Kristan

I discuss how important it is to make sure your payroll provider or payroll department is making your payroll tax deposits on time today at


Lessons learned the hard way: why employers should use EFTPS to check their payroll tax deposits

Wednesday, January 26th, 2011 by Joe Kristan

EFTPS.JPGWe mentioned yesterday a sad story about small businesses allegedly swindled by their third party payroll provider. But keeping your payroll in-house doesn’t always keep you out of payroll tax trouble either, as a case decided yesterday against a Des Moines businessman shows.
The businessman owned a distribution company. Somehow the company got behind on its payroll taxes, but the owner apparently didn’t find out until he asked his outside accountant to respond to notices from the IRS looking for the taxes. Then, according to the court, the owner made what proved to be a terrible mistake — he paid other creditors ahead of the IRS.
Last February a U.S. district court judge in Des Moines ruled that paying the other creditors was a “willfull” act that triggered personal liability for the owner, Charles Colosimo, as a “responsible person.” The Eighth Circuit Court of Appeals upheld the decision yesterday. The appeals ruling explains (citations omitted):

“The term willfully does not connote a bad or evil motive, but rather means a voluntary, conscious, and intentional act, such as the payment of other creditors in preference to the United States.” Willfulness is generally a question of fact, but if a responsible person knew of payments to other creditors after he was aware of the failure to pay over withholding taxes to the government, his actions are willful as a matter of law.

Being surprised by a bill for unpaid payroll taxes is a severe, sometimes even fatal, blow to a business. It’s even worse if you are a “responsible party,” because that follows a responsible party even if the business was incorporated. That’s why business owners should know how to use the Electronic Federal Tax Payment System to check online to make sure their payroll taxes are current.
Cite: Colosimo, CA-8, No. 10-1593
Link: Prior Tax Update coverage.


Criminal borrowing

Friday, November 19th, 2010 by Joe Kristan

When a small business fails to remit payroll withholding to the IRS, sometime they justify it to themselves as only a short-term loan to tide the business over tough times. The IRS doesn’t look at it that way at all, as a South Dakota manufacturer has learned the hard way:

The former owner and president of two businesses in Brookings, South Dakota, who collected taxes from his employees and then failed to account for and pay those federal income and FICA taxes, was sentenced November 15, 2010, to 21 months in federal prison.
Michael D. Hoppe, age 60, from Watertown, South Dakota, received the prison term after a May 27, 2010, guilty plea in federal court in Sioux Falls. Hoppe was convicted of one count of failing to account for and pay taxes.

Mr. Hoppe will also have to pay $670,000 in restitution for taxes not remitted from July 2005 through January 2009.
The IRS seems to be much more willing to pursue criminal charges for payroll tax nonpayment than they used to be. As risky as non-remittance has always been, it’s even more foolish now.


But you could end up paying your payroll taxes twice.

Wednesday, February 17th, 2010 by Joe Kristan

If your payroll service goes to the dark side and takes your money, the IRS still wants it. My new post tells you how to protect yourself.

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If it’s not a tax, why does the IRS make me pay it?

Wednesday, October 21st, 2009 by Joe Kristan

Lapsed conservative Bruce Bartlett opposes a payroll tax cut to stimulate the economy. One of his arguments is that the payroll tax isn’t a tax. The Tax Policy Blog makes the obvious reply: Payroll Taxes Are Taxes.

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Payroll outsourcing: trust (a little), but verify (a lot).

Thursday, August 20th, 2009 by Joe Kristan

How would you like to read this news about your payroll service provider:

A Monroe County grand jury charged Jeffrey A. Sykes with the felonies of second-degree grand larceny and second-degree criminal tax fraud.
Sykes, 49, of Wayland, Steuben County is expected to be arraigned within the next few weeks. He is free on $30,000 bail.
Sykes, owner of Paybooks Inc., was arrested in June after the office of Attorney General Andrew M. Cuomo froze the company


Payroll tax troubles for Kerry campaign?

Thursday, June 4th, 2009 by Joe Kristan

IRS files an $800,000+ lien against the Kerry 2004 presidential campaign, prompting millions of Americans to wonder, “Who is ‘Kerry’?”
The campaign says the IRS is wrong.

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Thursday, November 8th, 2007 by Joe Kristan

You have to be resilient to survive winter in Northern Minnesota. Take Duluth web consulting firm Fifty Below Sales & Marketing, Inc. After the IRS won the right to levy on the company for unpaid payroll taxes, it seemed that the company might not make it to the next snowfall. Yet they were in federal court again this week, fighting to avoid a permanent injunction ordering the company to file its payroll tax returns and pay its taxes. The company lost this court battle, but it’s an achievement of sorts that they’re still battling.
Cite: United States vs. Fifty Below Sales & Marketing, Inc. No. 06-1112