In our November 2015, five-part series on employment taxes and worker classifications, we addressed the importance of compliance with employment tax laws and the severe repercussions facing those who treat funds meant to be paid over to the government as their own.
Steven Lynch certainly should have known better. The Pittsburgh Tax Attorney and owner/manager of a Pennsylvania Iceoplex was recently convicted for failing to collect and pay over to the IRS more than $790,000 in payroll taxes that had been withheld from his employees’ wages from 2012 through 2015. Lynch established a variety of companies in the course of his Iceoplex operations, including:
- 1. Iceoplex at Southpointe, LLC, which operated the ice rink and indoor field;
- Body Tech at Southpointe, LLC, which managed the health club; and
- Jay’s Sports Bar and Restaurant, Inc., which managed the sports bar at the complex.
He also controlled a residential real estate management company that went under a variety of names, including ASMC Investment, LLC.
Actions that led to Lynch’s prosecution
Lynch apparently had a history of being delinquent in paying employment taxes. His indictment states that from 2004 through 2006, Lynch had been issued a series of notices of tax liens and notices of intent to levy his companies’ bank accounts. In 2008, he renamed Body Tech at Southpointe, LLC as SRA Services, LLC, which was held as a shell company that managed only one or two bank accounts and nothing more. At that time, he also designated SRA Services as the new employer of everyone employed at the three Iceoplex companies and of ASMC.
Approximately two years later, Lynch formed a new company, SRA Employee Services, LLC. This was another shell company which, soon after formation, was designated the new employer of the Iceoplex companies’ employees, as well as of the employees of ASMC and SRA Services. From 2011 through 2013, Lynch failed to pay over employment taxes for his employees through SRA Employee Services. In or around January 2014, Lynch then moved all the employees back to the Iceoplex companies and ASMC, which properly filed and remitted all employment tax forms and payments for a few months. From April 2014 through April 2015, Lynch again failed to timely pay over employment taxes for ASMC and the Iceoplex businesses.
Charges and conviction
Lynch’s strategy of establishing layer upon layer of separate corporate vehicles, along with his history of employment tax delinquency, led to charges for:
Lynch was convicted on September 8, 2016 on 16 counts under 26 U.S. Code § 7202 (he was found not guilty of the obstruction charges). He faces up to 80 years’ imprisonment (5 years for each count), a period of supervised release, and monetary penalties. Sentencing is scheduled for January 11, 2017.
Criminal tax defense attorneys in San Francisco
The IRS and DOJ have become increasingly aggressive in their examinations of possible employment tax noncompliance. If you are under investigation, or merely seek advice on how to ensure that you are handling your business tax issues properly, contact the tax law firm of Moskowitz, LLP.