August’s Amusing Tax Convictions

Maybe it’s a new trend, but our usual source of news for tax crimes and the action of the Justice Department this month has rendered multiple cases and convictions from, of all things, failure to properly withhold and pay employee-based taxes.  Now, employee withholding has always been a ripe fruit to be picked by unscrupulous owners and operators, and the IRS has sent many, many folks to prison for misappropriating these funds, but to see – rapid fire – multiple cases come to trial is always a bit surprising, even for our editorial team.  It just goes to show that there is always another challenge.

One example?  According to court documents and statements made in court, John H. Worthington of Owings Mills, Maryland, owned and operated The Grill at Harryman House restaurant.  As part of managing the restaurant, Worthington issued Forms W-2 to his employees and withheld federal income and Social Security and Medicare (FICA) taxes from their wages. However, from 2010 through 2021, Worthington did not file Forms 941to report these employment taxes and did not pay the withholdings over to the IRS. In total, this represented nearly $3 million owed to the IRS.  Worthington faces nearly a decade in prison and significant restitution fees when he is sentenced later this year. 

A similar case in Minnesota involving an automobile transmission business saw the owner pleading guilty to willfully failing to account for and pay over employment taxes.  Timothy J. Lundquist owned and operated Dynotec Industries, Inc., and was responsible for filing quarterly employment tax returns and collecting and paying over to the IRS payroll taxes withheld from employees’ wages. From at least the last quarter of 2013 through 2018, Lundquist did not, however, pay withholdings to the IRS or file required employment tax returns. In total, he caused a tax loss to the IRS of over $1.2 million.  Lundquist faces a statutory maximum of five years in prison.  He also faces a period of supervised release, restitution, and monetary penalties upon his sentencing. 


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