CPA steals the payroll taxes, owner has to pay the IRS

You read it right! The CPA stole the payroll taxes, which means he has the money. Now, the owner is responsible, as he has to pay the payroll taxes due to the IRS, and matters get worse. The owner also has to pay a 100 percent trust fund penalty on the W-2 payroll taxes, which includes federal income, social security, and Medicare taxes that the CPA embezzled.

Background

The case of Rodney Taylor. Rodney hired a CPA, Robert Gard, to attend to his corporation’s bookkeeping and accounting matters. As years passed, Cumulatively Gard embezzled around $1 million to $2 million from the corporation. Gard suffered a heart attack while going over the fabricated records of Taylor and his financial partner. At this time, Taylor saved Gard’s life, and while recovering at the hospital, Gard revealed his embezzlement deed.

Taylor sued Gard and collected $175,000 from an insurance company. Taylor also sued the bank for helping Gard in the embezzlement and got $900,000. But, Taylor did not use any of the settlement proceeds to pay the IRS the embezzled payroll taxes.

Why does Taylor have to pay?

The fact is that Gard, the embezzler, should have paid the IRS as a tax law’s responsible party to pay the money. This does not stop Taylor from being the responsible party, too. He delegated Gard, but he cannot delegate his tax law responsible person status.

When the IRS showed up, Taylor was the target. Gard was part of history. Now, Taylor has money from the lawsuits, which he can use to pay. For the IRS, it doesn’t matter who pays; all it wants is the money due.

How to protect yourself?

Using payroll services like Paychex, Gusto or ADP, payroll can be done within no time. Having the payroll under your control, there is no scope for embezzlement. When you delegate payroll or bookkeeping, consider this:

Have the payroll delivered to your doorstep so you can see it first. With the reports in your hands, you can get everything in place.
Check the IRS electronic federal tax payment scheme (EFTPS) every month to verify if the payroll tax money is paid to the IRS.

Following these simple steps can protect you from being embezzled by none. Large companies can structure an internal control system to reduce the chances of payroll embezzlement.

Takeaways

The owner of the company is responsible for remitting the payroll taxes. Even if you delegate the task to an outsider, you are still responsible for making sure the IRS has the payroll taxes. Ensure the EFTPS account shows IRS has been paid:

If your CPAsomeone embezzles your payroll money, you pay twice:

You unintentionally paid the embezzler
You will pay the IRS.