Employer Payroll Taxes and Labor Planning

Discussion Topic 1: In the Real Word: Scenario for Discussion

In Little Rock, Arkansas, a church pastor was found guilty of payroll tax fraud by withholding employee payroll taxes and failing to remit them from 2006 through 2010. The pastor is serving a sentence of 33 months in prison with 5 years of supervised release and $450,000 in restitution to the IRS.

Do you think this was a fair sentence? Why or why not? Use the tax laws presented in this chapter to support your answer.

Can you make response each posted below# 1 to 2

1 From: Tyler Cugino posted Aug 11, 2018 6:10 PM

After reading the case stated above and thinking about it, I feel that the pastor is serving a sentence of 33 months in prison with 5 years of supervised release and $450,000 in restitution to the IRS is a fair sentence. I feel way because he purposely did not pay any or all of his payroll taxes. This is highly illegal and unfair because everyone else has to pay these payroll taxes so why would he think it is alright for him not to. The statute that best fits this case is ‘Title § 26 USC Willful’ which authorizes any person in Arkansas was to adhere to the terms of giving returns and failure to pay any required taxes should result in a penalty. In this case, the pastor is rightfully given imprisonment for 33 months with 5 years of supervised release and is fined $450,000 for the taxes he did not pay.

In conclusion, the pastor is being fairly charged for committing payroll tax fraud for five years. This is breaking the law and is unfair to those of us that pay every single tax required of us by the government.

2 From: Christina Watson posted Aug 10, 2018 12:54 PM

Hello Professor and class,

The pastor’s sentencing and fines were fair due to the fact that he willfully evaded paying the employee payroll taxes. He took a huge risk not paying the taxes and must pay the consequences. Employers must report income and employment taxes withheld from their employees on an Employer’s Quarterly Federal Tax Return (Form 941) and deposit these taxes in full to an authorized bank or financial institution pursuant to Federal Tax Deposit Requirements. Employers are also responsible for filing a FUTA return annually, and depositing those taxes. Payroll taxes are the government’s money. These taxes which would include FICA, FUTA, and SUTA, and additionally could include local taxes, worker’s compensation and 401(k) contributions where applicable. Employers who do not comply with the employment tax laws may be subject to criminal and civil sanctions for willfully failing to pay employment taxes.

Employees suffer because they may not qualify for Social Security, Medicare, or unemployment benefits when employers do not report or pay employment and unemployment taxes. Consequently, taxes withheld and paid by compliant employers are used to pay the refunds and social security benefits of employees whose employers did not pay the withheld taxes. Under Title 26 USC § 7201 & § 7203, willful means a voluntary, intentional violation of a known legal duty. The IRS does not have to prove that the person had bad faith or a bad purpose. In addition, the financial circumstances of the person or the company he or she is acting for are not considered in determining whether the failure to pay the tax was willful. Therefore, his fine and imprisonment time are appropriate due to the nature of the fraud.

Title 26 USC § 7203 and § 7201 Explanations:

Title 26 USC § 7203. Willful failure to file return, supply information, or pay tax. Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof shall be imprisoned not more than 1 years, or fined not more than $100,000 for individuals ($200,000 for corporations), or both, together with cost of prosecution.

Title 26 USC § 7201. Attempt to evade or defeat tax. Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution (U.S. Government Publishing Office, n.d.)

References

U.S. Government Publishing Office. (n.d.) Government Publications.: 26 U.S.C. 7203 – Willful Failure to File Return, Supply Information, or Pay Tax. Retrieved on August 09, 2018 from https://www.gpo.gov/fdsys/granule/USCODE-2015-titl…

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