Spa owner pleads guilty to payroll tax fraud

A business owner in Brookville, New York, has pleaded guilty to intentionally failing to collect and pay work taxes to the IRS.

Spa owner pleads guilty to payroll tax fraud

Court documents show that Sung Soo Chon, better known as Steve Chon, oversaw the day-to-day operations of two spas and their related companies. Chon, 63, was the CEO, president and majority shareholder of Spa Castle Queens in College Point, New York, and Spa Castle Texas, in Carrolton, Texas.

payroll fraud

According to statements made in court, Chon ordered subordinates to pay cash wages to some employees, some of whom were not legally employed to work in the United States.

Chon faces a maximum sentence of five years in prison, as well as a period of controlled release, restitution and fines.

The case highlights the severity of the penalties for tax fraud violations for small businesses. One of the biggest challenges small business owners face is managing money, payroll and taxes efficiently, while obeying the law. Being dishonest and careless about the way employment taxes are administered and filed could lead to an investigation by the Internal Revenue Service (IRS). This can lead to charges, fines and even prison terms.

Payroll Compliance

Next, it is vital that small businesses are familiar with labor and wage laws. If they don’t have the knowledge, outsourcing payroll to specialists can be an invaluable investment in ensuring this unavoidable aspect of running a business is done correctly and in compliance with the law.

A statement from the Justice Department’s Office of Public Affairs describes how the owner of two spa companies defrauded the IRS.

“From the first quarter of 2014 to the first quarter of 2017, Chon failed to withhold all legally required federal payroll taxes from the wages of some spa employees and filed false labor tax returns with the IRS. During this time, Chon caused the companies to hide more than $1.3 million in cash wages. In all, the spa companies have not paid $199,238 in payroll taxes because of the IRS,” the Office of Public Affairs said.

The case is under investigation by the IRS-Criminal Investigation.

Different types of tax fraud

While this case represents a serious crime in the areas of employment and payroll taxes, it emphasizes once again the importance for small businesses not to become involved in tax fraud.

There are many different types of tax fraud that small business owners can become involved in. Without the right guidance or advice, a small business can easily grow into something much bigger, endangering a small business’ reputation.

This case underlines the value of seeking professional advice and support in employment law, and in particular payroll matters.

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