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Conviction Upheld For Failing To Remit Tax Withholdings

Published by on November 3, 2008

The Supreme Court of Virginia has upheld the conviction of a physician who withheld tax payments from employee paychecks but failed to remit the money to the Commonwealth.  Our earlier post on the Court of Appeals decision is here.  A copy of the Court’s opinion is here. The significant part of the case for employers […]

The Supreme Court of Virginia has upheld the conviction of a physician who withheld tax payments from employee paychecks but failed to remit the money to the Commonwealth.  Our earlier post on the Court of Appeals decision is here.  A copy of the Court’s opinion is here.

The significant part of the case for employers is the Court’s holding that the Virginia Code imposes a statutory trust on funds withheld from employee’s wages for state income tax liability purposes.  “When such funds are withheld they are no longer the property of the employer or the employee. . . .  Such funds are held in trust for the benefit of the Commonwealth and are not the property of the employer.”  The physician here was convicted for four felony counts of embezzlement because he did not remit the withheld funds to the Commonwealth.  In fact, he comingled the money in his general corporate bank account with regular funds and the balance fell below the amount he was supposed to be holding in trust.

Oddly enough, according to the opinion, the whole situation arose because the Virginia Employment Commission concluded that the physician’s nurses should not be treated as independent contractors.  The independent contractor misclassification had even more serious repercussions than usual in this case.

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