St. Charles Man Sentenced For Payroll Tax Fraud

SOUTH ELGIN, IL — The owner of a South Elgin-based manufacturing company has been sentenced to 9 months in federal prison and ordered to pay $3.3 million in restitution to the U.S. Treasury and the Illinois Department of Revenue following his conviction for payroll tax fraud.

Edward T. Arnieri 71, of St. Charles pleaded guilty to a federal tax offense in June for withholding about $3.9 million in employee payroll taxes and failing to remit the money to the Internal Revenue Service, according to a news release from the U.S. Attorney's Office, Northern District of Illinois.

The federal charge was filed against Arnieri for his failure to withhold federal income taxes from employers for almost eight years while he was the president and sole owner of Lane Tool & Manufacturing Company Inc., which is located in South Elgin.

Arnieri's company issued W-2 forms and paychecks to its employees that falsely reflected that the company had withheld income and payroll taxes from their wages, according to the news release. Arnieri’s conduct also resulted in the filing of inaccurate individual tax returns for himself, resulting in additional tax loss of about $450,000.

Payroll taxes are made up of both contributions by the employer and employee for Social Security and Medicare that are collected and remitted on a quarterly basis as well as Federal Unemployment Taxes that are paid by the employer annually, according to the news release.

Additionally, as an employer, Arnieri was required to withhold federal income tax from employees’ wages and send those amounts to the U.S. Treasury on a quarterly basis, according to the news release.