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April 28, 2014


Indictment comes down in high-profile payroll tax case

Today the breaking news in tax circles includes the story about a U.S. congressman who has been indicted on fraud charges in connection with payroll taxes at the business he once operated.

Federal authorities contend that U.S. Rep. Michael G. Grimm of New York, a former FBI agent, concealed what he was actually paying employees by keeping two sets of books at the restaurant he operated from 2007 to 2010.

In this post, we will discuss this case in the context of the recurring issue of payroll tax compliance. This issue affects both employers and workers in Texas and across the country.

In the New York case, authorities say that the congressman in question paid many of his employees in cash. According to the charges, he did not disclose the full amount of these payments to the payroll-processing companies he used.

As a result, the payroll processors filed false tax returns. The processors did this because they had been given inaccurate payroll records.

Federal prosecutors have announced numerous white-collar charges against the congressman. These include mail fraud, wire fraud, tax fraud, obstruction of justice and conspiracy.

The charges came after an investigation that went on for more than two years.

The congressman appeared in court today and pleaded not guilty. If proven, the charges speak to a high-profile case of wrongdoing.

It should be noted, however, that in many more prosaic cases, employers struggle to comply with payroll tax requirements that are not always clear.

As we noted in our August 15 post last year, it is not always easy for employers to know what the proper classification of certain workers should be for employment tax purposes.

Source: The New York Times, “Grimm, Staten Island Congressman, Is Indicted on Fraud Charges,” Stephanie Clifford, April 28, 2014

Tax Crimes