Pittsburgh Tax Attorney Gets 48 Months For Employment Tax Fraud
On January 12, 2017 Steven Lynch, a Pittsburgh tax attorney, was sentenced to 48 months in prison,following his conviction for the willful failure to pay over payroll taxes (Trust Fund Taxes). The defendant co-owned and operated a recreational sports facility in Washington, County, Pennsylvania between 2004 and 2015.
The sports facility, doing business as “Iceoplex at Southpointe,” included a fitness center, ice rink, soccer field, restaurant and bar. According to facts contained in the DOJ press release dated September 8, 2016, Lynch controlled the finances of the businesses. As a “responsible person” Lynch was required to: (i) collect income and employment taxes from employees of the various businesses; (ii) properly account for the trust fund taxes and file payroll tax returns; and (iii) remit the taxes collected to the IRS.
The jury found that between 2012 through 2015, Lynch failed to timely pay over to the IRS more than $790,000 in taxes withheld from the wages of the employees for these businesses. Instead, Lynch set up SRA Services, a shell company with no assets and transferred the various payroll accounts to that entity. The corporation was set up for the sole purpose of obstructing or impeding the IRS efforts to collect the employment taxes owed.
An employer who collects Federal Withholding Tax from its employees is responsible for filing accurate payroll tax returns and remitting these taxes to the IRS.
Employment Taxes required to be withheld include Federal Income Tax as well as Social Security and Medicare Taxes. The Employer is also required withhold to the Employer’s’ portion of Social Security and Medicare Taxes. Failure to properly collect, report and pay these taxes to the IRS can result in criminal prosecution.
Employment Taxes are considered “trust funds.” As a fiduciary, Employer has an absolute duty to safeguard these funds and the failure to do so can have dire consequences. The Employer also has an affirmative duty to file quarterly and annual payroll tax returns, which accurately reflect the correct amount of Employee Withholding Taxes, as well as the Employer’s contributions for its portion of Social Security and Medicare taxes. Finally, an Employer is charged with the responsibility of remitting the taxes withheld to the IRS.
Over recent years, the IRS and the DOJ tax division have ramped-up criminal enforcement efforts in the area of employment taxes. This case makes clear that employment tax fraud is a top priority for the IRS and they will not hesitate to prosecute anyone, including tax attorneys.
©2017 Anthony N. Verni, Attorney At Law, Certified Public Accountant