Jay Hustead, DDS, DMD, will also have to perform 200 hours of community service, pay restitution of nearly $66,000, and enter a closing agreement with the Internal Revenue Service (IRS) to pay the full amount of taxes due.
Dr. Hustead's corporation, Hustead Dental and Orthodontics of Annapolis, employed several dentists, technicians, and office employees and had annual payrolls exceeding $1 million from 2001 to 2006. He was the company president and sole owner, and was responsible for the dental operations.
Susan Hustead, his wife, was responsible for business management, including working with company accountants on tax issues. She pleaded guilty for her role in the scheme and will be sentenced on December 14, 2011.
The company used a payroll service for payroll processing and to prepare quarterly employment tax returns, including withholding employment taxes from employee wages on behalf of the dental office. The payroll service mailed the quarterly employment tax returns to the dental office with instructions for filing the returns. Dr. Hustead admitted that quarterly employment tax returns were not filed for tax years 2001 through the first half of 2005.
In October 2005, after receiving a letter from an IRS agent requesting that they file the delinquent employment tax returns, the Husteads filed the returns, which falsely stated that all employment taxes were paid. The Husteads also did not timely file quarterly tax returns for the remainder of 2005 and 2006, filing those returns in February 2007.
According to the plea agreement, the Hustead Dental office manager received the notice of taxes due from the payroll service, entered the information into QuickBooks, printed the checks to pay the IRS, and provided the checks to Susan Hustead.
But the Husteads admitted that they did not send the checks to the IRS. Of the 110 QuickBook entries indicating employment tax payments to the IRS, the IRS only received one check for $25,521 in 2006. Out of the accounts containing the federal employment taxes withheld from employees and not paid to the IRS, dozens of checks totaling $163,000 were drawn payable to Jay Hustead and deposited into the couple's personal bank account.
In addition, checks totaling $116,000 were used to pay business expenses, such as office rent and supplies, and a credit card bill. A check for more than $5,000 was paid to the Husteads' country club, and more than $927,000 of the funds to be paid to the IRS remained in the Hustead Dental corporate bank account.
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