Consistent with its ongoing employment tax enforcement efforts, the Justice Department recently announced developments in two cases involving the failure to properly withhold and remit federal employment taxes from employee wages.

On April 25, the Justice Department announced that Kae Wook Lee, the sole owner and CEO of Mona Lisa 7 Corporation, was sentenced to twelve months and one day in prison for failing to collect and remit federal employment taxes related to his operation of a karaoke bar in Queens, New York.  The Justice Department’s press release states that Lee manipulated receipts from operations and paid employees in cash without collecting, accounting for, or remitting employment taxes to the IRS.  The press release also states that he concealed the cash payroll from his accountant and executed false tax returns underreporting wages and the amount of employment taxes owed.  In addition to the prison sentence, Lee was ordered to serve two years of supervised release and pay $612,500 in restitution.

On April 30, the Justice Department announced that the owner of a Greenville, Ohio glass company pled guilty to failing to truthfully account for and pay over federal employment taxes.  The announcement explains that Gail Cooper owned Greenville Architectural Glass LLC from 2007 through 2015.  In addition to various individual federal income tax failures for the years 2008 through 2014, Cooper caused her company to withhold from the wages of employees without remitting the withheld taxes to the IRS.  She also failed to file employment tax returns from the first quarter of 2013 through the second quarter of 2015.  Cooper admitted to causing a cumulative financial loss to the government exceeding $500,000, which she agreed to repay in restitution.  Cooper will be sentenced in August and faces up to five years in prison and a $250,000 fine in addition to the agreed upon restitution.

Photo of Michael M. Lloyd Michael M. Lloyd

Michael Lloyd practices in the areas of tax and employee benefits with a focus on information reporting and withholding on cross-border payments (e.g., Forms 1042 and 1042-S) and Foreign Account Tax Compliance Act (FATCA), backup withholding, employment taxation, the treatment of fringe benefits…

Michael Lloyd practices in the areas of tax and employee benefits with a focus on information reporting and withholding on cross-border payments (e.g., Forms 1042 and 1042-S) and Foreign Account Tax Compliance Act (FATCA), backup withholding, employment taxation, the treatment of fringe benefits, cross-border compensation, domestic information reporting (e.g., Forms W-2, 1099, 1095 series returns), penalty abatement, and general tax planning and controversy matters. Mr. Lloyd advises large U.S. and foreign multinationals regarding compliance with information reporting and withholding issues, as well as a range of other federal and state tax issues.

Photo of S. Michael Chittenden S. Michael Chittenden

Michael Chittenden practices in the areas of tax and employee benefits with a focus on the Foreign Account Tax Compliance Act (FATCA), information reporting (e.g., Forms 1095, 1096, 1098, 1099, W-2, 1042, and 1042-S) and withholding, payroll taxes, and fringe benefits. Mr. Chittenden…

Michael Chittenden practices in the areas of tax and employee benefits with a focus on the Foreign Account Tax Compliance Act (FATCA), information reporting (e.g., Forms 1095, 1096, 1098, 1099, W-2, 1042, and 1042-S) and withholding, payroll taxes, and fringe benefits. Mr. Chittenden advises companies on their obligations under FATCA and assists in the development of comprehensive FATCA and Chapter 3 (nonresident alien reporting and withholding) compliance programs.

Mr. Chittenden advises large employers on their employment tax obligations, including the special FICA and FUTA rules for nonqualified deferred compensation, the successor employer rules, the voluntary correction of employment tax mistakes, and the abatement of late deposit and information reporting penalties. In addition, he has also advised large insurance companies and employers on the Affordable Care Act reporting requirements in Sections 6055 and 6056, and advised clients on the application of section 6050W (Form 1099-K reporting), including its application to third-party payment networks.

Mr. Chittenden counsels clients on mobile workforce issues including state income tax withholding for mobile employees and expatriate and inpatriate taxation and reporting.

Mr. Chittenden is a frequent commentator on information withholding, payroll taxes, and fringe benefits and regularly gives presentations on the compliance burdens for companies.