PaySource’s former owner, Robert Sacco, who was accused of bilking the IRS of $26.7 million, pleaded guilty Oct. 26 to conspiracy to defraud the United States by impeding the Internal Revenue Service, money laundering and tax evasion. He has not yet been sentenced.
Dayton-based PaySource, which had offices on Poe Avenue and employed 40 people, was a co-employment company — meaning that it hired a client company’s employees, thus becoming their employer of record for tax and insurance purposes. PaySource enabled business owners to outsource the management of human resources, employee benefits, payroll and workers’ compensation and other strategic services.
According to court documents, Painter assisted in the preparation and filing of a false corporate income tax return with the IRS for the third quarter of 2007. This federal tax return fraudulently stated that the total wages Paysource II, Inc., one of Sacco’s companies, paid to employees was $2.4 million and as a result, Paysource II, Inc. incurred an employment tax liability of just more than $600,000.
Paysource II, Inc. actually paid $6.6 million in total wages to its employees and incurred an actual employment tax liability of $1.7 million. Painter was well aware this tax return under reported Paysource II, Inc.’s taxable income, according to Carter M. Stewart, U.S. Attorney for the Southern District of Ohio.
Painter also filed fraudulent third- and fourth-quarter returns in 2007 for several Sacco-owned companies, including PaySource, Inc., PaySource II PaySource III, Inc., PaySource IV, Inc., PaySource V, Inc., and PaySource VI, Inc., according to court documents.
“Corporate executives have a significant responsibility to collect and turn over all IRS withholding taxes,” said Darryl Williams, Special Agent in Charge, IRS, Criminal Investigation, Cincinnati Field Office. “Employment tax fraud can also impact employees, who may see future benefits such as Social Security, Medicare or Unemployment Compensation reduced or eliminated when their employers don’t comply with the law.