The owner of Bruce’s Roofing in Enumclaw, Washington, was sentenced today in U.S. District Court in Seattle to two years in prison and three years of supervised release for willfully failing to collect and pay over tax, announced U.S. Attorney Jenny A. Durkan.
Bruce H. Sprague, 52, admitted with a guilty plea in July 2012, that he paid his employees a portion of their wages in cash from 2005-2008, and that he did not collect employment taxes including Social Security, Medicare and income tax withholding from the cash wages. In his plea agreement, Sprague agrees to pay restitution in the amount of $1,179,761 to the IRS. At sentencing U.S. District Judge Thomas S. Zilly said, “You were able to live the good life because you stole over a million dollars from the government…. Others need to know that you cannot steal from the government and not spend a significant time in jail.”
According to the plea agreement, Sprague, the sole owner of Bruce’s Roofing LLC, informed his employees in early 2005 that they would receive a portion of their wages in cash. The cash payroll was about fifty percent of each employee’s pay. No payroll taxes were collected on the cash portion of the employees’ pay. By paying in cash and not reporting the wages, Sprague avoided more than a million dollars in payroll taxes. In 2006, Sprague failed to collect and pay over to the IRS $391,548 in employment taxes. In 2007, he failed to collect and pay over to the IRS $448,642 and in 2008, he failed to collect and pay over to the IRS $339,571. Even as he was failing to collect and pay over the employment taxes, Sprague was taking substantial wages and profits from the business – more than $929,000 in 2005, more than $1 million in 2006, more than $1.3 million in 2007, and more than $685,000 in 2008. In his plea agreement, Sprague agrees to cooperate with the IRS to determine all taxes due and owing from him and his company.
“Trying to cheat on your payroll taxes by paying your employees in cash is a losing proposition,” said Kenneth J. Hines, Special Agent in Charge of the IRS in the Pacific Northwest. “When you try to avoid payroll taxes by paying your employees in cash, you place yourself at risk of prosecution, penalties, and prison. Today's sentencing highlights the commitment of IRS Criminal Investigation to the vigorous pursuit of those who try to cheat on their payroll tax obligations.”
In asking that Sprague serve a prison term, prosecutors noted the sentence should send a warning to others. This sentence “should signify to others who may be currently engaged in similar conduct, or those who may be tempted to engage in such conduct, that paying employees “under the table” is a serious crime that is not worth the price,” prosecutors wrote in their sentencing memo.
The case was investigated by the Internal Revenue Service Criminal Investigation (IRS-CI). The case is being prosecuted by Assistant United States Attorney Susan Loitz.
Information provided by the U.S. District Attorney's Office in Seattle.