It’s early 2014 and tax filing season for tens of millions of Americans is underway. As tax preparers ramp up their business so does the IRS Criminal Investigations Division. Although IRS – CID prosecutes tax evasion year round, most indictments are unsealed between January 1 st and April 15th. Why? Because the IRS believes that the negative press associated with these indictments will dissuade people who might be thinking of cheating.
This week is no different. In New Jersey, the IRS announced it had indicted a 68 year-old Medford man and charged him for tax evasion and failing to pay payroll taxes. Although indicted last December, the arraignment was just held 2 weeks ago.
According to the indictment, Zenon Rotuski operates several cleaning businesses. The IRS says he withheld payroll taxes from his workers but never turned those monies to the IRS. Payroll and sales taxes are considered trust fund taxes. Failure to turn over money withheld or paid by others is a serious crime.
To avoid getting caught and prolong the scheme, the IRS says after failing to turn over withholdings for several months, Rotuski would simply close one business and open another with an almost identical name. In just a few years, the IRS says he shuffled business from Associated Building Management Corp to American Building Management Corp to Associated Building Maintenance Cleaning Corp. All 3 business were branded ABMC and that is the name depicted on the company’s website and trucks.
Obviously, the scheme did not work.
While failure to pay taxes may only be a misdemeanor, once you deliberately try to conceal your crime or hide money, the IRS considers those actions to be an affirmative act of tax evasion. Here, the IRS says that serially opening, closing and transferring business and employees from one company to the next was done for the purpose of evading taxes.
Given the season, the IRS was quick to issue a press release. A spokesperson for the Newark IRS field office said, “As we approach this year’s tax filing season, this indictment is a reminder that business owners have a responsibility to withhold income taxes for their employees and remit those taxes to the Internal Revenue Service.”
Many taxpayers and small business owners find themselves over their head. What starts as something temporary, such as putting off taxes for a month or two, soon escalates and before long, several years have gone by. While Rotuski may have been able to work out a payment plan or at worst faced misdemeanor charges, his decision to close companies that owed taxes and simply transfer the work to another business landed him in hot water.
If you find yourself treading water and unable to pay taxes, remember to always pay trust fund taxes first (withholding and sales tax). Whatever you can’t pay, contact the IRS and try to work out a payment plan. If things continue to falter, speak with an experienced criminal tax attorney as soon as possible.
Whether Rotuski had the money or not to pay the business’ taxes is no longer relevant. Now he faces big legal bills, an indictment for tax evasion and possibly years in prison.
The IRS attorneys at Mahany & Ertl have helped people across the United States avoid prosecution and enforced collections. For more information about collections and audits, contact attorney Bethany Canfield at or by telephone at (414) 223-0464. Already under criminal investigation or facing tax evasion charges? Contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct). All inquiries are kept in strict confidence and protected by the attorney-client privilege. Legal services provided in most jurisdictions.
Need more information? Our Due Diligence tax blog has over 1000 text searchable articles.