Taxation & Estate Planning

Payroll Tax Fraud Equals Big Tax Problem for Hospital CEO

By Darrin Mish

Guilty as Charged

Payroll tax fraud is a matter of grave importance to the IRS. It recently took to court the CEO of Granada Hills Community Hospital, a hospital with tax exemption status for failing to remit taxes amounting to close to $2 million. The federal court last week made a ruling that agreed with the IRS' contention and pronounced the CEO guilty.

In his judgment, the judge reasoned that if a person acts voluntarily, intentionally or consciously to use or cause to be used funds withheld for payroll taxes for any purpose other than the payment of those taxes, then he is taken to have acted 'willfully'. In the case above, the CEO had allowed checks bearing his signature drawn from the funds withheld for payroll taxes to pay for the settlement of debts to creditors of the hospital and other expenses.

The judgment went on to further clarify that even the act of neglecting to investigate a suspected act of not paying payroll taxes or not taking corrective action upon not paying it amounts to willful non-payment. In addition, delegating the responsibility to pay to someone else (like a subordinate colleague) does not disprove willfulness on the part of the person primarily responsible. In the CEO's case, he had subordinate staff do the actual paying.

The President and CEO of Granada Hills Community Hospital admitted to knowing that the payroll taxes were not paid completely by the hospital for the quarters March and June 2003. He also admitted to signing checks totaling $2.9 million to pay off other creditors instead of paying the IRS when he was aware that the payroll taxes were still outstanding. Furthermore, the CEO admitted that he was authorized to transfer funds to the government for tax payments but intentionally chose not to.

Therefore, based on all the evidence presented, it is clear that the CEO acted willfully in not paying payroll taxes and instead used funds withheld for such purposes to pay outstanding bills with creditors.

Marijuana Raid

A host of federal officers from the Drug Enforcement Administration, Federal Bureau of Investigation, Internal Revenue Service, Los Angeles County Sheriff's Department, Los Angeles Police Department, Torrance Police Department and Culver City Police Department raided two Westside marijuana dispensaries and the residences of the owners. The two dispensaries were located at Washington Boulevard in Culver City and Overland Avenue in Los Angeles.

The authorities seized various items including 200 plants, 100 pounds of marijuana and $100,000 cash. They also made one arrest. In addition, during the raid the police shot a dog believed to be a pit bull. The animal has since been treated by a vet and is making a smooth recovery.

The officers did not say what prompted the raid. The names of the owners of the homes were also not disclosed.

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for almost two decades. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.

Full post as published by IRS Problem Solver Blog on September 09, 2009 (boomark / email).