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Payroll outsourcing: trust (a little), but verify (a lot).

August 20, 2009

How would you like to read this news about your payroll service provider:

A Monroe County grand jury charged Jeffrey A. Sykes with the felonies of second-degree grand larceny and second-degree criminal tax fraud.

Sykes, 49, of Wayland, Steuben County is expected to be arraigned within the next few weeks. He is free on $30,000 bail.

Sykes, owner of Paybooks Inc., was arrested in June after the office of Attorney General Andrew M. Cuomo froze the company’s assets, alleging that he defrauded businesses of more than $2 million by taking clients’ money intended to pay taxes and spending it on his personal and business expenses.

The Rochester, New York-area provider's clients included lawyers, non-profits, and small businesses.

When a payroll service provider steals withheld taxes, the IRS still wants the money, and they expect the defrauded businesses to pay up. That can ruin a small business. That's why business owners should sign up for the Electronic Federal Tax Payment System ("EFTPS") -- even if they outsource their payroll function. EFTPS users can go online and make sure that their payroll provider is making the deposits to the IRS, rather than his Caymans bank account.

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