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THE EMPLOYER'S WORST NIGHTMARE

June 05, 2008

Short of a direct hit by an asteroid, few things can be more disastrous to a business than to find out that the payroll service provider has been pocketing your payroll taxes. Russ Fox tells the scary story of a North Carolina payroll service provider, James McLamb:

McLamb had a unique method of handling trust fund taxes. He'd calculate the correct amount of taxes, accept those remittances, and then change the numbers to much lower figures. He'd use the lower numbers to report payroll to the IRS and the North Carolina Department of Revenue. It's unclear from the news story where the $8 million that was supposed to go to the IRS ended up; suffice to say it didn't end up in the U.S. Treasury and likely lined McLamb's pockets.

Mr. McLamb has pleaded guilty to fraud charges, but that's small comfort to the employers who now have to pay their payroll taxes a second time.

The Moral: If you use an outside payroll provider, check them out thoroughly, and check occassionally with the IRS to make sure they are receiving the payroll tax deposits.

Tags: Russ Fox.tax crime.

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