An Ohio woman who used hundreds of thousands of dollars in employee tax payments to fund a luxury lifestyle has been sentenced to 18 months in federal prison. Tammy Butdorf, 51, was sentenced in federal court in Akron after being found guilty of failing to pay employment taxes withheld from workers at her husband’s electrical contracting business. This was confirmed in an official statement released by the U.S. Attorney’s Office for the Northern District of Ohio. Butdorf worked as the accountant and office manager for the family business. Her duties included collecting federal income tax, Social Security, and Medicare payments from employees’ wages and sending the money to the government. However, an investigation by the Cleveland office of the Internal Revenue Service Criminal Investigation (IRS-CI) found that she had been moving the money into private accounts over a period of six years. Between 2015 and 2021, Butdorf failed to send more than $494,000 (£380,000) in required quarterly employment taxes to the federal government.
Misdirected funds spent on property and private clubs
Court records show that instead of sending the withheld payroll taxes to the Internal Revenue Service, Butdorf made payments directly to herself and her husband. Federal prosecutors said the money was used to pay for personal and family expenses. One of the purchases made with the unpaid tax money was a condominium in Florida. Investigators also found that the diverted payroll money was used to pay membership fees at a private camp, cover costs for a shooting club, and fund family holidays. Under federal tax law, business owners and people responsible for handling payroll must keep employee tax payments separate and hold them for the government. Using this money for personal expenses or business costs instead is a federal crime.
Federal sentencing and restitution order
After her conviction, a federal judge sentenced Butdorf to 18 months in prison. She will also face a period of supervised release after completing her sentence. The judge also ordered her to repay the Internal Revenue Service in full for the unpaid taxes that built up over the six-year period. Assistant United States Attorney Megan R. Miller handled the prosecution for the Northern District of Ohio. Federal authorities stressed that failing to pay employment taxes can harm workers by putting their future Social Security and Medicare benefits at risk. They also said that businesses that avoid paying these taxes gain an unfair advantage over companies that follow federal tax laws. The case was handled in coordination with the Department of Justice’s National Fraud Enforcement Division. This initiative works with federal law enforcement agencies to investigate and tackle financial fraud and tax-related crimes across the country.