North Carolina business owners found guilty of tax fraud

On Behalf of | Mar 22, 2024 | Criminal Defense |

At this time of year, many of us are thinking about taxes. Some have already filed their returns, while others know the deadline is coming up soon. Some are grumbling about what they must pay while others are looking forward to a nice refund.

Some may even wonder if they can get away without paying their taxes, but a recent North Carolina case illustrates why that would be a bad idea.

Trust fund taxes case

A jury found two Charlotte businessmen guilty of multiple counts of tax fraud. Prosecutors said the men, who ran a software sales and support business, failed to pay more than $150,000 in taxes to the Internal Revenue Service in 2016 and 2017. According to the prosecution, the men withheld more than $600,000 in trust fund taxes from their employees’ wages, but failed to report them or make the required payments to the IRS.

The men face penalties of up to five years in prison for each count.

Prosecutors said the men also failed to pay employment taxes, which led their company to owe more than $1 million to the IRS.

Monetary penalties for failure to pay taxes

It is unusual for people to go to jail for evading taxes. Most cases are treated as a civil matter.

If it finds that a person filed their taxes, but failed to pay the required amount, the IRS typically sends a letter informing them they have failed to pay. It then calculates a penalty based on 0.5% of the unpaid amount per month it is overdue. The total amount of this penalty cannot exceed 25% of the person’s total unpaid taxes.

Things get more complicated if the person not only fails to pay, but also fails to file a tax return. In this type of case, the person will face more penalties. However, it’s important to remember that there are repayment plans and other ways to reduce one’s penalties.

Failure to file a return can also, in some case, involve criminal penalties, including jail time.

Criminal penalties

The IRS does not pursue a jail sentence in a case where a person is simply unable to pay their taxes. However, it may pursue jail time for a person who filed a fraudulent return, or helped another person to do so. A conviction on this offense can carry a prison sentence of up to five years.

A person who fails to file a return can, in addition to tax penalties, face a sentence of up to one year for each year they failed to file.

Federal offenses

Failure to pay federal taxes is a federal offense, and so these cases are heard in federal court. Federal cases have specialized rules and procedures, and it is important for defendants to seek out help from processionals with experience in federal criminal defense.