Four Family Members Who Defrauded IRS of more than $5 million in Payroll Tax Payments Face Prison

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Temporary employment agencies have become a more prevalent part of the American work experience since the 2007 financial crisis and the difficult economic times that followed. While on one hand, temporary employment agencies can provide workers with an entry point into a new industry, on the other hand they require payment for their placement services that could otherwise be used to pay the worker a higher wage or to hire additional workers. Furthermore, when the temporary agency acts as the worker’s employer, certain duties and acts are required of the employer. Failure to satisfy these tax duties can lead to criminal prosecution and result in a prison sentence or significant monetary penalties.

How can an employer satisfy their obligation regarding business trust fund taxes?

Trust fund taxes are probably most familiar within the context of how a business withholds payroll tax from its employees’ paychecks every pay period. While the exact deductions on your paystub are likely to differ, commonly found ones include those for federal income tax, Social Security and Medicare taxes (FICA), state and local taxes, and voluntary deductions including an IRA or 401(k).

For the federal tax withholdings, the employer is acting as a trustee for the US government by holding these government-owned funds until it pays them over to the government. The important take-away here is that the money is not the employer’s – it belongs to the government. Other duties the employer may have include:

  • Maintaining compliance with workers’ compensation contributions and laws that may be applicable.
  • Providing, as per agreed-upon contractual terms, benefits and fringe benefits to which the employee is entitled. This can include sick pay, vacation pay, retirement plans, life insurance policies, and other benefits.
  • Collecting , accounting for and paying over of Social Security and Medicare taxes (FICA) and federal unemployment taxes (FUTA).
  • Filing quarterly payroll tax return with the IRS.

Can a business be penalized for failures to collect, account for and paying over trust fund taxes?
Yes, a business and its principals can face serious civil and criminal tax consequences for failing to satisfy their duties regarding payroll taxes. In fact, this is exactly what occurred to a family who ran two different temp agencies in Massachusetts. Each of the four family members were sentenced for their tax crimes. The sentences included:

  • Margaret Mathes — was sentenced to 80 months in prison and three years of supervised release.
  • Bosea Prum — The daughter of Ms. Mathes, Ms. Prum was sentenced to two years in prison and three years of supervised release.
  • Sam Pich — Bosea Prum’s brother-in-law was also sentenced to two years of prison and three years of supervised release.
  • Thaworn Promket — Ms. Prum’s husband faces one year and a day in prison and three years of supervised release.

All of the defendants pleaded guilty to conspiracy to defraud the IRS and mail fraud. They also pleaded guilty to structuring their monetary transactions solely for the purposed of avoiding tax reporting requirements. In addition to the charges that were common to all defendants, Ms. Prum also pled guilty to the filing of false employment tax returns and other offenses. Mr. Pich pled guilty to 17 counts of assisting in the filing of false employment tax returns. Pruomket pled guilty to an additional two counts of structuring and seven counts of filing false employment tax returns.

Aside from the prison sentences imposed, the defendants also owe more than $6 million in workers’ compensation fees and employment taxes. Ms. Mathes and Ms. Prum have been ordered to pay $100,000 within the next 45 days. Ms. Prum and Mr. Promket also ran into trouble with their personal taxes and have been ordered to pay back more than $500,000 to resolve underpayments of tax.

Rely on our experience resolving payroll tax issues
Problems with collecting, accounting for and paying over payroll trust fund taxes can lead to serious tax problems. The Brager Tax Law Group is dedicated to correcting Federal and California payroll tax issues and other serious tax concerns. To schedule a confidential consultation, call 800-380-TAX LITIGATOR or contact us online.

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