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Virginia CPA, company in IRS hot seat for not remitting payroll taxes

Greg Moore and Irvin "Jim" Jones Jr. have been friends for more than 40 years. For most of the past 10 years, they worked together at Jones' business, which performed inventory services for large companies.

Greg Moore and Irvin “Jim” Jones Jr. have been friends for more than 40 years. For most of the past 10 years, the Norfolk, Virgina residents worked together at Jones’ business, which performed inventory services for large companies.

But a rift with the Internal Revenue Service landed both in federal court, on opposite sides, fighting each other over who owes the government nearly half a million dollars.

Federal tax law holds company leaders or their accountants personally liable if they fail to pay payroll taxes or are late in filing. Such violations cost the government $2.4 billion in 2011, and the IRS is aggressive in pursuing offenders. (By comparison, individual taxpayers cost the government $12 billion that year.)

The IRS said most offenders settle out of court, but in rare cases the dispute ends up before a jury. A two-day trial that played out before U.S. District Judge Arenda Wright Allen ended Thursday with a civil judgment against Jones. The jury cleared Moore of wrongdoing.

The problem began about seven years ago when Jones operated a Virginia Beach company called Omnicount. In 2007, he shut down that company and formed a new one called OmniData, which performed the same inventory services as Omnicount. He also moved the operation to Waynesboro.

Jones shut down Omnicount in part because of a similar rift with the IRS over unpaid payroll taxes. Jones said in court that he took responsibility for the error and cut a deal to pay back about $400,000 in back payroll taxes and penalties.

Moore, a Norfolk resident and a Certified Public Accountant (CPA) since 1974, began working for Jones at Omnicount in 2004 and moved over to OmniData. He testified that Jones was to pay back the debt in $6,000 monthly installments.

He acknowledged that as the company accountant, he was responsible for cutting those checks.

While making those payments, the company failed to pay its current payroll taxes, according to court records and testimony.

“Whose decision was that?” Moore’s attorney, Anne Bibeau, asked him on the witness stand.

“Mr. Jones’,” Moore said.

“Why didn’t you just pay it?” she continued.

“There wasn’t any money,” Moore answered.

Jones, who represented himself, told the jury that he was constantly traveling for business and relied on Moore to take care of all the accounting issues, including paying the taxes.

“I hired people to do what I didn’t know how to do,” he said. “I depended on our CPA.”

He blamed Moore for failing to communicate with him frequently enough.

“I don’t think you’ll see anything from me that says, ‘Absolutely, do not pay those taxes,’ ” he said.

But Moore’s attorney produced an email from Jones to one of his employees that read:

“When it comes to the IRS, I approve who does what and who delivers and when.”

The government argued that both men should be held accountable.

“Mr. Moore put his head in the sand and did not stand up to Mr. Jones,” said Tom Jaworski, a Department of Justice tax attorney representing the IRS.

At the same time, “Jones knew taxes were not being paid,” he said.

In the end, after about 1-1/2 hours of deliberations, the jury agreed with Moore, holding Jones personally liable for about $485,000.

After the jury filed out, Moore turned and hugged his wife, wiping tears from his face.

“You have to have faith, but you never know how things are going to end up. It validates me,” he said. “Now I don’t have to sell the house or cash in the retirement.”

When asked what he thought of the verdict, Jones shrugged and said, “It is what it is. I gotta do what I gotta do. I’ll just go back to work. The taxes have to be paid.”

As they left the courtroom, the two old friends shook hands and parted ways.


Copyright 2013 – The Virginian-Pilot