Construction Payroll Check-Cashing Tax Fraud: The Check Clears, the Payroll Disappears

A check casher can enable construction payroll tax fraud by turning subcontractor checks into cash wages that employers keep off the reported payroll. The workers receive their pay, the intermediary takes a fee, and the payroll taxes go unpaid. If you work behind the check-cashing counter or inside a subcontractor’s accounts, you may know which business issued the check, who collected the cash and which crew it paid.

This page follows the network between the construction check and the workers: the check casher, the shell company, the insurance certificate and the records that reach the tax return. The useful connection is between what the network paid and what the employers reported. We work with insiders who can explain that connection, including the person whose records show only one part of it.

How Does a Construction Payroll Check-Cashing Network Work?

A construction payroll check-cashing network can move a subcontractor’s payroll through an intermediary that converts the checks into cash and keeps a fee. In the Florida criminal cases below, that service also supplied insurance paperwork that made the workers appear covered under another company’s policy. The same arrangement could keep wages outside tax reporting while making the subcontractor appear ready to take the job.

FinCEN’s August 2023 announcement on construction payroll tax evasion described networks using shell companies and fraudulent documents to evade payroll taxes and workers’ compensation premiums. FinCEN issued the notice with IRS Criminal Investigation and identified banks and check cashers as the principal channels used in these schemes. It also identified the competitive disadvantage imposed on legitimate contractors and their employees.

The intermediary’s role matters because a check carries a business identity into a transaction that ends in cash. In one Florida network, payroll checks entered the intermediary company’s bank accounts before cash went to the subcontractors’ workers. In another, shell companies operated a check-cashing and cash courier business. Those arrangements leave different records at the contractor, the intermediary and the bank, even when they concern the same payroll.

For a subcontractor controller, the question is which company received the payroll money and what that company actually did with it. For a check-cashing employee, it is the connection between the customer, the check and the cash recipient. We put that business explanation beside the transaction history. A company name on the check can be the beginning of the story, rather than its answer.

What Do False Currency Reports Hide?

A check-cashing payroll network can use false currency reports to conceal the cash transactions supporting off-book wages. The Justice Department’s account of the criminal case involving Check Cash Pacific describes construction-payroll check cashing and false currency transaction reports used to facilitate those wages. A jury convicted the business’s operator.

According to that criminal-case account, Check Cash Pacific cashed more than $177 million in payroll checks from January 2014 through December 2017. The Justice Department said the conspiracy prevented collection of more than $44 million in taxes.

For an insider, the currency report belongs beside the underlying transaction history and the payroll records. The cash transaction and the reported wages describe different stages of the same payment. Someone who knows who brought in the check or received the cash may be able to explain a connection that the reporting obscured. We examine that explanation against the records of the businesses involved.

Which Tax Records Can Show Off-Book Construction Wages?

A construction subcontractor’s cash payroll and tax records become useful together when they connect the checks funding wages to the wages and taxes actually reported. Evidence of the gap between the books and the tax return can sit across several businesses. The employer, bank, payroll provider and preparer each hold a different part of the payment and reporting chain.

The central comparison is what went to the workers against what entered payroll reporting and reached the Treasury. These records answer different parts of that question:

Payroll calculation, reporting and payment are separate jobs. The employer withholds federal income tax and the employee portions of Social Security and Medicare taxes, adds its own employment-tax liability, and reports and deposits the taxes. A payroll register describes the wages included in that process. A bank record shows where money moved.

The IRS’s payroll outsourcing guidance makes the employer’s continuing responsibility important even when a provider handles the work. We compare the provider’s debit with the tax payments credited to the employer. A deduction from the business’s bank account and a payment posted to its tax account are different records.

The Payroll Provider Saw Only the Smaller Checks

Nastar Roofing shows how the payroll provider can receive an incomplete picture of the wages. In its account of the criminal case in which the owner and payroll administrator pleaded guilty, the Justice Department described nominal checks processed through a payroll company while the larger cash payroll stayed outside that company’s knowledge.

That distinction matters if you know the cash wages but see payroll reports built from the smaller checks. We examine the information the employer sent to the provider and preparer alongside the payments workers actually received. The question is where the larger payroll disappeared from the reporting chain, and who kept it out.

What Do the Florida Construction Payroll Cases Show?

The Florida criminal cases show how a payroll intermediary can sell both cash conversion and the appearance of insurance coverage. The certificates used to obtain work and the payroll moving through bank accounts describe the same workforce.

Escobar Plastering Put Hundreds of Workers Behind a Small Policy

The Justice Department’s account of court documents and information presented in court in the Escobar Plastering criminal case describes agreements with hundreds of construction subcontractors. The operators, who pleaded guilty, supplied certificates of insurance in the company’s name to contractors from whom those subcontractors wanted work. The certificates represented that the subcontractors worked for Escobar Plastering and had coverage through its workers’ compensation insurance.

The policy applications told the insurers a much smaller story:

The operators charged 7% to 8% of the subcontractors’ payroll for the arrangement. Thousands of checks totaling approximately $148,760,824 entered the company’s bank accounts. The operators withdrew cash to pay the workers after taking their fee, without withholding or paying over payroll taxes. The Justice Department put the resulting unpaid payroll taxes at $37,174,388. The Justice Department said insurers unwittingly covered hundreds of workers and would have charged annual premiums totaling approximately $14,878,207 had they known the payroll they were covering.

In the Justice Department’s account, we see certificates securing construction work while the policy applications shrink the workforce to a handful. If you handled those certificates or the payroll behind them, you may know why the company described its workers differently to different recipients. The crew grew when it needed a contract and shrank when it needed a premium.

Another Florida Network Sold Check Cashing and Cash Delivery

A separate Justice Department account of court documents and statements in a Florida criminal case describes shell companies running an unlicensed check-cashing and cash courier business from 2015 to 2022. One operator pleaded guilty to conspiring to defraud the United States and to operate an unlicensed money transmitting business. The shell companies cashed approximately $89 million in construction subcontractors’ checks and charged a percentage of each check as their fee.

According to those court documents and statements, contractors and subcontractors paid workers in cash without withholding and paying the required payroll taxes. The operator also caused false tax documents to be filed with the IRS to conceal the scheme. The Justice Department reported a total loss to the United States of more than $38 million.

The same account describes the conspirators leasing insurance certificates to contractors and providing insurers false information about worker numbers and pay. The cash courier service, tax documents and insurance representations therefore belonged to the same network. A person handling one of those functions may be able to connect an apparently separate shell company to the construction payroll it actually served.

What the Construction Payroll Insider Can Explain

An insider can connect a company on a check to the people controlling its account and the workers receiving its cash. That knowledge gives the financial records a business explanation. It can also connect the payroll sent to a provider with the larger payroll the provider never saw, or an insurance certificate with the workforce omitted from the application.

The most useful account stays close to your work. A subcontractor controller may know why the checks went to another company. A payroll employee may know which wage payments stayed outside the register. A check-cashing employee may know the customer behind the repeated transactions. We build the connections with you, including who controlled the disbursements and what information reached the return preparer.

Construction Payroll Evidence and Whistleblower Rewards

Federal payroll-tax information belongs in the IRS whistleblower program, which can pay awards based on qualifying collections. The federal False Claims Act excludes federal tax claims. We assess your evidence and the tax whistleblower reward opportunity with you, including which businesses and payroll periods the information reaches.

If the same evidence also shows false claims for government payments, a whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. We work with you to build the strongest case for the conduct your evidence shows.

You Know Where the Payroll Went

If you handled the checks, cash wages or insurance certificates, speak with our whistleblower experts about the network behind them. We build the case around your knowledge of the money and the decisions that kept wages off the books, and stay beside you through the process. We bring in construction payroll tax whistleblower lawyers to build your strongest construction payroll tax whistleblower case.