Here is a word of caution to all business owners: pay your payroll taxes. If not, beware of one month in federal prison per $100k of unpaid taxes. The United State Department of Justice recently announced the sentencing of a Montana business owner to 15 months in prison for failure to pay employment taxes withheld from employee wages and unfiled federal income tax returns.
The press release from the Department of Justice states:
Owner of Montana Construction Company Sentenced to 15 Months in Prison for Employment Tax Fraud
Caused Tax Loss of More Than $1.5 Million
A Montana man was sentenced today to 15 months in prison for employment tax fraud.
According to court documents and statements made in court, Trennis Baer, of Great Falls, owned and operated Baer Construction based in Great Falls. Beginning in 2010 and continuing through 2018, Baer did not file quarterly employment tax returns, nor did he pay employment taxes withheld from his employees’ wages to the IRS. Baer did not comply with these legal requirements, even though the company’s outside accountant from at least 2013 on prepared employment tax returns to be filed and calculated the taxes due. In addition to spurning his employment tax obligations, Baer willfully did not file personal income tax returns for the years 2001 to 2006, 2008, and 2010 to 2018. The total tax loss to the IRS from Baer’s conduct is more than $1.5 million.
In addition to the term of imprisonment, U.S. District Judge Brian Morris ordered Baer to serve two years of supervised release and to pay approximately $935,251 in restitution to the United States.
Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and Acting U.S. Attorney Leif M. Johnson for the District of Montana made the announcement.
IRS Criminal Investigation investigated the case.
Trial Attorneys Matthew Hoffman and Eric Taffet of the Justice Department’s Tax Division prosecuted the case.
Voluntary Disclosure. A business owner who has committed tax improprieties need not share the fate of the taxpayer from the press release. The IRS offers a voluntary disclosure program which permits the taxpayer to pay the tax and to not be referred for criminal prosection. However, the voluntary disclosure must be made by strictly following the established procedure, including disclosure before the IRS begins and audit.
Practice Point. Even in Montana, taxpayers can go to prison for tax crimes. But there are ways to become compliant and avoid criminal prosecution. Taxpayers are encouraged to contact Jared Le Fevre right away to discuss becoming compliant with tax law to avoid the menace of criminal prosecution.
About the Author. Jared M. Le Fevre is a Partner in the Tax, Trusts and Estates Practice Group of Crowley Fleck PLLP. Mr. Le Fevre represents taxpayers before the IRS, IRS Independent Office of Appeals, Tax Court, Federal District Court and state tax agencies throughout Montana, Wyoming, North Dakota, Idaho, and Utah. Mr. Le Fevre is involved in federal, state and local tax audits, appeals, and tax resolution throughout these western states. Mr. Le Fevre also advises clients on the tax effects of business and real estate transactions.