Owner of Canton company that manufactures American flags sentenced to two years in prison for failing to pay $162,000 in taxes
The owner of a Canton company that manufactures American flags was sentenced to two years in prison for failing to pay more than $162,000 in payroll taxes.
Richard Spencer, 52, was ordered to pay $197,040 in restitution. He previously pleaded guilty to failure to account for, collect and pay over employment taxes.
U.S. Attorney Justin Herdman said: “This defendant did not paying over taxes he collected from his employees, and intentionally misclassified others to avoid taxes. This defendant benefitted from being able to say that his flags were made in America, but he failed to meet his obligations to his employees and the American taxpayer.”
“Richard Spencer did not have any problems with earning income from manufacturing the American flag, but he did have problems with paying employment taxes to the IRS that he withheld from his employees,” said William Cheung, Acting Special Agent in Charge, IRS Criminal Investigation, Cincinnati Field Office. “What is very disturbing about this case is that an IRS audit disclosed that Richard Spencer improperly treated employees as contractors and even after learning the results of the audit he continued to misclassify his employees and continued to fail to pay the employment taxes.”
Spencer controls RS Sewing, which manufactures American flags. Spencer oversaw production, source materials, paperwork and the company’s financial operations, according to court documents.
Spencer, beginning around 2008, reclassified some of his workers from employees to independent contractors. Following an audit in 2011, Spencer was informed he improperly classified the workers as independent contractors, and a penalty was assessed against Spencer. He continued to misclassify some employees and failed to pay employment taxes, according to court documents.
Spencer classified some workers as independent contractors and others as employees, although all RS Sewing workers were required to clock in and out, were paid wages by the hour, were provided materials to make the flags by RS Sewing and were otherwise treated the same by managers, according to court documents.
Spencer from 2012 through 2015, Spencer failed to withhold taxes from workers he knowingly and willfully misclassified as independent contractors. For workers classified as W-2 employees, Spencer withheld federal income, Social Security and Medicare taxes from employees but never paid the money to the IRS, according to court documents.
Overall, he failed to collect, account for and pay over approximately $162,728 of federal employment taxes, according to the indictment.
This case was investigated by the Internal Revenue Service – Criminal Investigations. It was being prosecuted by Assistant U.S. Attorneys Carmen Henderson and Robert Kern.