Louisiana Dept. of Revenue sues three businesses in statewide crackdown on payroll tax fraud

The Louisiana Department of Revenue (LDR) is taking legal action against three Louisiana businesses it accuses of evading taxes by not withholding and remitting the appropriate payroll taxes from their employees’ earnings. LDR is suing the companies to recover hundreds of thousands of dollars in overdue taxes, penalties, and interest.

In 2017, the GAME ON (Government Against Misclassified Employees Operational Network) Task Force was formed as an interagency network to combat employee misclassification. In collaboration with the Louisiana Workforce Commission’s Office of Unemployment Insurance and Office of Workers’ Compensation, LDR works to recover unpaid withholding tax by identifying businesses that misclassify employees. Most misclassifications involve employers improperly labeling workers as independent contractors to evade withholding tax and other costs. The employer commonly pays the worker in cash with no Louisiana payroll tax withheld.

“The evasion of withholding taxes is a serious crime that robs Louisiana taxpayers of revenues the state uses to provide vital services such as public safety, healthcare, education and infrastructure,” said Secretary of Revenue Kimberly Lewis Robinson.

LDR filed suit against Elliott Roofing Services of Metairie, Antunez Painting of Baton Rouge, and Extreme Cars & Trucks of Monroe. LDR assessed the companies through a new withholding audit program designed to recover withholding tax resulting from employee misclassification and unreported cash payments. The audit program focuses on labor brokers and industries that typically employ independent contractors, including construction, personal services, and staffing companies.

For the tax years 2013 through 2015, the total tax, penalty, and interest owed by the companies is more than $242,000:

    Total Tax, Penalty, & Interest  
Company Location 2013 2014 2015 Court
Elliott Roofing Services Metairie 24,921.19 18,886.53 11,227.28 24th Judicial District Court
Antunez Painting Baton Rouge 30,066.88 54,705.35 62,293.44 19th Judicial District Court
Extreme Cars & Trucks Monroe 5,008.69 14,492.21 20,519.33 4th Judicial District Court

One unfair advantage this type of fraud provides to companies misclassifying their employees is the ability to outbid competitors on state contracts and other business due to lower costs. These costs include withholding tax, paying at least the minimum wage, overtime compensation, family and medical leave, unemployment insurance, and workplace safety.

“We are putting companies who engage in this fraudulent behavior on notice that they shouldn’t expect get away with it,” Secretary Robinson said.

Lawsuits against the three companies were filed in December 2017. Several other audits are currently in progress, with some employers having agreed to pay the assessed withholding tax liabilities.