Nonpayment of federal taxes is a very serious matter and can land someone in prison. Famously, the gangster Al Capone who was said to vacation on White Bear Lake, Minnesota, was put in prison not for murder or racketeering, but for federal tax evasion.
Recently it was reported that a Minnesota business owner was sentenced to 12 months in prison for failing to pay federal withholding taxes. It was not reported, but we can assume that the business owner will also be subjected to paying the taxes with interest and penalties.
The Minnesota business owner's company was the Olen Staff Company. The company was a temporary staffing agency that opened its doors in 2001 and was closed by federal authorities in 2008. Sources reported that the agency primarily placed Latino workers on temporary jobs such as roofing. Problems arose due to allegations that many of the agency's workers were in the country illegally or were undocumented.
The 40-year-old owner's problems with federal taxation authorities is related to $150,000 that she allegedly withheld for federal income taxes and $276,000 that she withheld for Social Security and Medicare. Apparently the 40-year-old withheld the funds from the workers, but did not turn the funds over to the appropriate federal agencies.
The business owner's 12-month sentence is for the $150,000 owed to the Internal Revenue Service for the tax years of 2005 through 2007. There was no word as of yet for any consequences for the nonpayment of Social Security or Medicare withholding.
It is possible that business owners can make unintended errors. When such things happen, a legal tax professional can often work with the IRS for a repayment plan or other workout options to avoid prison time, or to reduce fines and penalties. It was not reported whether or not this particular business owner pursued that tactic prior to her guilty plea.
Source: KARE 11, "Minnesota business owner sentenced for failing to play employment taxes," July 19, 2012
Source: Staffing Talk, "Temporary Staffing Agency Owner Sent To Prison," David Gee, July 23, 2012
At our law firm we represent clients with federal and Minnesota uncollected tax issues as well as IRS audits and other federal taxation issues.