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At Dallo Law Group, we are pleased to share the successful resolution of a case involving a criminal investigation by the IRS for failure to remit payroll taxes under IRC Section 7202. The IRS’s decision to close the criminal investigation is highly significant, as cases like these are typically straightforward for the government to prosecute. Business owners facing similar charges often confront severe consequences, including felony convictions, heavy fines, and federal prison sentences.
Understanding the Stakes
Typically, delinquent payroll taxes are enforced through civil investigations. Lately, the IRS has begun investigating delinquent payroll taxes as a criminal rather than a purely civil matter. Under IRC section 7202, the government only needs to prove three elements:
- The business owner knew they had a payroll tax liability.
- They failed to remit those taxes to the IRS.
- They were aware when filing the payroll tax return that the taxes would not be paid.
Given that the burden of proof for the government is very low, it is straightforward for the government to secure a conviction. In this case, our client was facing serious legal repercussions, which included a felony conviction and the possibility of incarceration.
Dallo Law Group’s Legal Strategy
We were retained after our client received a summons for business records from an IRS criminal investigator. From the start, we took several decisive steps to protect our client’s interests and build a strong case. We approached the situation with:
- We contacted the IRS investigator, ensuring all future communications would go through our office, limiting direct interaction between our client and the investigator.
- Detailed Review of Business Records: We thoroughly reviewed the client’s financial records and found a key detail—our client had not transferred large amounts of money from the business or made any luxurious purchases. This was crucial in demonstrating that the case was not as clear-cut as the government initially believed.
- Personal and Financial Context: In addition to analyzing the financial records, we presented evidence of the client’s personal and financial circumstances, showing that our client’s failure to keep up with payroll tax deposits was not criminally motivated. This added depth to our argument and further discredited the government’s initial assumptions.
- Strategic Advocacy: We advocated strongly for our client by demonstrating that he was not part of the demographic the IRS was targeting under this specific code section. This approach helped us shift the focus of the investigation, ultimately leading to its closure.
The Case is Closed
After presenting a compelling case, the IRS investigator agreed to close the criminal investigation and return the matter to civil enforcement, which is an uncommon outcome for cases involving unpaid payroll taxes. Our client, who faced the prospect of a federal prison sentence and a felony conviction, is now able to continue running his business without the shadow of criminal prosecution.
At Dallo Law Group, we understand the seriousness of IRS criminal investigations and the impact they can have on business owners. We take pride in providing strong legal representation that protects our clients’ futures. If you or your business is facing IRS scrutiny or other tax-related challenges, we are here to help.
Contact Dallo Law Group today to discuss your case and find out how we can assist you in resolving your tax issues while protecting your livelihood.
Contact: (619) 795-8000