Spa Owner Pleads Guilty on Payroll Tax Fraud Charges

spa owner pleads guilty on tax fraud charges

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

Spa Owner Pleads Guilty on Payroll Tax Fraud Charges

Court documents show that Sung Soo Chon, known as Steve Chon, oversaw the daily operations of two spas and their related businesses. 63-year-old Chon was the CEO, president and majority owner 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 directed 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 penalty of five years in prison, as well as a period of supervised release, restitution, and monetary penalties.

The case highlights the severity of penalties for employment tax fraud offences for small business owners. One of the major challenges small business owners face is managing money, payroll and taxes efficiently, while following the law. Being dishonest and careless about the way employment taxes are managed and filed can lead to an investigation by the Internal Revenue Service (IRS). This can result in charges, fines, and even imprisonment.

Payroll Compliance

Subsequently, it is vital small businesses are conversant in employment and payroll laws. If they do not have the knowledge, outsourcing payroll responsibilities to specialists could be an invaluable investment to ensure this unavoidable aspect of running a business is carried out correctly and is compliant with the law.

A statement by the Department of Justice, Office of Public Affairs, described how the owner of two spa businesses frauded the IRS.

“From the first quarter of 2014 through the first quarter of 2017, Chon did not withhold all of the legally required federal payroll taxes from the wages of some of the spa employees and filed false employment tax returns with the IRS. During this period, Chon caused the businesses to conceal more than $1.3 million in cash wages. In total, the spa companies did not pay $199,238 in payroll taxes due to the IRS,” said the Office of Public Affairs.

The case in being investigated by the IRS-Criminal Investigation.

Different Types of Tax Fraud

While this case involves severe employment and payroll tax crime, it reiterates how important it is for small businesses not to become involved in tax fraud.

There are many different types of tax fraud small business owners can become embroiled in. Without the proper guidance or advice, it is easy for a small matter to spiral into something much bigger which jeopardizes a small business’s reputation.

This case underscores the value of seeking professional advice and support in matters related to employment law, and, specifically, payroll matters.

Image: Depositphotos

Gabrielle Pickard-Whitehead Gabrielle Pickard-Whitehead is a staff writer for Small Business Trends and has been a member of the team for 7 years. She is based in the United Kingdom and since 2006, Gabrielle has been writing articles, blogs and news pieces for a diverse range of publications and sites. You can read "Gabrielle’s blog here.".