Sentencing Error In Employment Tax Trust Fund Case

The U.S. Court of Appeals for the Third Circuit affirmed a couple's conviction April 23 on charges of failing to pay over $500,000 in employment taxes collected from the employees of their business, but rejected the trial court's sentence enhancements for abusing a position of trust (United States v. DeMuro, 3d Cir., No. 11-1887, 4/23/12). 

James and Theresa DeMuro owned TAD Associates LLC, a New Jersey engineering and surveying company. Between 2002 and 2008, the company failed to pay over to the Internal Revenue Service more than $500,000 in taxes that it withheld from employee paychecks.

The DeMuros were convicted in the U.S. District Court for the District of New Jersey of 21 counts of failure to account and pay over employment taxes, and each was sentenced to 51 months in prison.

Without the two-level enhancement for abuse of a position of trust, the DeMuros’ offense levels would be 22 and their Guidelines ranges would be 41 to 51 months. The Government argues that because this range is the same as the range ultimately used by the District Court, and because the sentences imposed were within this range, the sentencing error was harmless.

The fact that the sentenced imposed falls within the correct range does not alone establish harmless error. Moreover, the Government’s argument ignores the fact that the District Court found the Guidelines range to be inappropriate and varied downwards.

There is absolutely no basis in the record for us to conclude that the District Court would not have made a similar variance if the abuse of a position of trust enhancement had not applied.

We thus cannot conclude that the error here was harmless. We therefore vacate the DeMuros’ sentences and remand for resentencing.