Ocean City Businessman Pleads Guilty to Failing to File Personal, Corporate and Employment Tax Returns
Failed to Pay Corporate, Individual and Employment Tax Totaling $296,701
Baltimore, Maryland - Patrick McLaughlin, age 43, of Ocean City, Maryland pleaded guilty today to failing to file individual income tax returns in 2009 and one count of failing to report employment tax withholdings in 2007.
The plea agreement was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Acting Special Agent in Charge Eric C. Hylton of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office.
“As tax day approaches, this case should serve as a reminder that filing tax returns and paying taxes are legal obligations, not options,” said U.S. Attorney Rod J. Rosenstein.
"The IRS-Criminal Investigation Division takes these violations of law very seriously," said Eric Hylton, Acting IRS Special Agent in Charge. "Paying taxes is a solemn obligation of citizenship and those who blatantly fail to file and pay their taxes undermine our democracy."
According to his guilty plea, McLaughlin operated several concession businesses in Ocean City, including: Sunbeach Studios, Ltd. and United Beach Photo, Inc., which were in the business of photographing beach tourists; Arctic Inventions, Ltd., which operated a fleet of retail ice cream trucks; and 85 N Sunny, which was in the business of renting beach equipment to summer tourists.
McLaughlin failed to file corporate tax returns for Sunbeach, Arctic and United for tax years 2003 to 2009. The total income tax liability that McLaughlin avoided by not filing corporate returns for United from 2007 to 2009 is $10,239.
McLaughlin also did not file individual income federal tax returns for tax years 2005 to 2009, thus failing to report his personal income from his businesses and failing to pay federal income tax of a total of $151,114. In December of 2010, McLaughlin was notified by IRS agents that he was under criminal investigation. McLaughlin submitted corporate and individual income tax returns for the missing years thereafter.
In addition to failing to file corporate and individual tax returns, McLaughlin also failed to report and remit Social Security and Medicare taxes (employment taxes) withheld from his employees’ wages, resulting in a total employment tax loss to the government of $135,348.46. For example, during 2006, McLaughlin and Sunbeach withheld $10,292.94 in employment taxes from Sunbeach employees, and made a one-time tax payment to the IRS of $15,000. McLaughlin had a duty to report these withholdings, remit a total of $20,585.88, and file a Form 941 at the end of each fiscal quarter of 2006. McLaughlin’s failure to file Forms 941 for Sunbeach for each quarter and to remit the full amount due resulted in a tax loss to the government of $5,585.88.
Similarly, during 2007, McLaughlin and United withheld $29,381.49 in employment taxes from the United employees. McLaughlin failed to report these withholdings, and to withhold an additional $14,355.66 in matching funds, resulting in a tax loss to the government of $87,474.31.
Finally, during 2007 and 2008, McLaughlin and 85NS withheld $8,839.58 and at least $12,419.56 respectively in employment taxes from the employees. McLaughlin failed to report these withholdings, and to pay over an additional $21,259.14. McLaughlin made only a one-time employment tax payment of $230, resulting in a tax loss to the government of $42,288.27.
As a result of McLaughlin’s failure to pay corporate, individual and employment taxes, the total tax loss to the government is $296,701.46.
McLaughlin faces a maximum sentence of one year in prison and a $100,000 fine for failing to file individual income tax returns in 2009, and for failing to report employment tax withholdings U.S. District Judge Catherine C. Blake scheduled sentencing for October 5, 2012, at 10:00 a.m.
United States Attorney Rod J. Rosenstein commended the IRS- CI for its work in the investigation and thanked Assistant United States Attorneys Mark W. Crooks and Harry M. Gruber, who are prosecuting the case.