Although little known among average Americans, United States v. Sertich holds great significance for business owners who withhold payroll taxes. Read on to learn more about the case — and how it impacts your business.
In 2015, plastic surgeon and medical business owner Anthony P. Sertich Jr. were indicted for his failure to remit to the IRS on previously withheld payroll taxes. His trial revealed that, while he had filed correct withholding statements, he’d also used funds withheld from employees for his own purposes. What’s more, he made every effort to avoid paying the millions he owed the IRS. Ultimately, he was sentenced to 41 months in prison, plus nearly $3 million in restitution.
Following his conviction, Sertrich filed a motion for a new trial, which was denied. He then appealed his case, arguing that he was not guilty because he’d correctly reported on withheld funds. Sertrich claimed that the use of ‘and’ in Section 7202 (“[anybody] required to collect, account for, and pay over any tax…who willfully fails to collect or truthfully account for and pay over such tax shall…be guilty of a felony”) meant that he was only in violation of the law if he failed to follow both obligations — reporting and paying. The U.S. Court of Appeals for the Fifth Circuit concluded that Section 7202 creates a dual obligation.
What Can Business Owners Learn From United States v. Sertich?
United States v. Sertich holds several key lessons. First and foremost: business owners cannot assume that reporting correctly on withheld payroll taxes will matter if they fail to actually remit those payments.
Additionally, Sertrich’s case shows how difficult it can be to prove a lack of willfulness in one’s failure to remit payroll taxes. Claiming to be unaware of tax obligations isn’t good enough if the IRS indicates otherwise.
Don’t be caught off guard by tax obligations or penalties. The team at Highland Tax Group can keep you informed and prepared for every tax-related challenge.