Civil Contempt and Employment Taxes

I.R.C. Section 3111

The United States District Court for the Southern District of New York ruled in USA v. Jiffy Cleaners of Hartsdale, Inc. and Wilton Calderon at case number 16 CV 2428 (VB) filed July 27, 2020, that civil contempt requested by the Government was appropriate since a prior judgment for $110,853.48 was clear and unambiguous setting forth the taxpayer’s responsibilities regarding making employment tax payments and the government sufficiently detailed taxpayer’s noncompliance. The taxpayer operated a dry cleaning business. The government alleged that the taxpayer failed to pay over employment taxes and opened a court case to collect. One of the owners of the business was present in court when a judgment was entered ordering them to pay the government for monies owed, timely file and pay current returns. Further, the judgment enjoined the taxpayer from assigning or transferring money or assets to any other person or entity. Monthly affidavits were to be delivered to the IRS to substantiate compliance.  A short time later, the spouse of the owner incorporated a business to operated as a dry cleaners one mile away. The original business was closed. The IRS learned that certain equipment had been transferred from the old business to the new one. The government contended that the taxpayer had not complied in many ways, one of which was transferring property. Additionally, they failed to pay current taxes and file returns from the time of judgment to shut down of operations. The taxpayer made what the Court deemed to be a handful of frivolous arguments. Ultimately, the Court deemed the taxpayers to be in contempt. The Court entered an order prohibiting the owner from occupying any position within any business for which he would be responsible for collecting, truthfully accounting for, paying, withholding, or filing any taxes pursuant to the IRC, including employment taxes.