Owner of S&S Drywall, Stephen Gregory Nagy thought he was being quite inventive when he came up with his scheme to not only cheat the IRS but also his employees back in 2010. After the IRS assessed his company, they determined that Nagy owed more than $480,000 in unpaid federal employment taxes, penalties, and interests, Nagy came up with a plan that he would hire several undocumented workers and pay them a small portion of the prevailing wage. He also demanded that those same workers pay him a large portion of cash in return—which went unreported.
From there the business owner forced his employees (via intimidation and threats) to file for unemployment benefits—even though they continued to work for him. He gave them cash to make up for the difference in salary, which was not reported—nor were the federal income taxes, social security, or Medicare taxes paid. In essence, the State of Oregon paid part of the employees’ salaries.
In order to hide the cash, Nagy created shell companies in his sister’s name—transferring business and personal assets. Considering the fact that Nagy was already known by the IRS, it’s mind boggling how he thought he wouldn’t get caught! Of course, he did, in September of 2014, when he was sentenced to 19 months in a federal prison and ordered to pay more than $480,000 in restitution.
His former employees now have no social security benefits or Medicare. Read more in my February eNewsletter and be sure to subscribe to receive “IRS Terror Tale of the Month” tales and tax resolution business and marketing tips!