Payroll Service Firm Accused of Not Making Client Tax Payments

June 26, 2003 ( - A Silver Spring, Maryland payroll service company was forced into involuntary bankruptcy and had its assets seized after leaving hundreds of clients in hock to the federal government for back taxes.

The Richmond Times-Dispatch reported that FirstPay Inc. stuck clients with unpaid Internal Revenue Service (IRS) back taxes worth millions of dollars.

Former clients said they let FirstPay handle their payroll taxes and thought their tax payments were up to date. Delinquency notices from the IRS had been routed to FirstPay, so clients were unaware that they even owed taxes. The FBI and the US Treasury Department, are investigating the business and business assets, including computer files and a bank account, have been seized.   Even the owner’s death in a boating accident in the British Virgin Islands is being questioned.

Mark Rothman, a former pawnshop owner, died at age 43 in Tortola, British Virgin Islands, according to probate documents. He owned a 42-foot boat as well as a house in Montgomery County, Maryland., a beach home and several vehicles.

Rothman’s personal items could be seized as well so they can be sold to pay creditors. However, investigators would need to determine first if any of the personal items were bought with company money. Meanwhile, an IRS agent told a federal bankruptcy judge that about 250 former clients apparently owe back payroll taxes with a liability of more than $11 million, The Washington Post reported.

FirstPay recently had $1.3 million in bank accounts. By the time a bankruptcy trustee was appointed to the case in early June, the amount had dwindled to $275,000.

Whether FirstPay clients recover any money to pay their back taxes is unknown at this time.  Administrative bankruptcy expenses will be paid first, followed by estate taxes and any employee claims.