One of the more dangerous misunderstandings about the tax law is the statement I often hear, “If the IRS comes knocking I’ll just pay up and they will leave me alone.”
Rosie Quinn unfortunately discovered that paying undeposited withheld payroll taxes did not absolve her from a tax charge of failing “to collect, account for and pay over” trust fund taxes under IRC Section 7202. The District Court held that despite depositing the trust funds, albiet late, she could still be prosecuted and subjected to a fine of up to $10,000 and imprisonment for up to 5 years.
Obviously, using withheld taxes to finance ones’ business or worse one’s lavish lifestyle is not a wise decision.
Reference: U.S. v. Quinn, US District Court, Kansas (2/3/2011). For other dangerously incorrect assumptions about the tax law see article posted on WWW.STEINBERGTAXLAW.COM