An Ohio woman jailed 18 months by a federal judge must also serve time behind bars after systematically stealing taxes withheld from employees' paychecks to finance private property and holidays.
Tammy Butdorf, 51, received the prison sentence in federal court in Akron after being convicted of willful failure to pay over employment taxes. She managed office operations and bookkeeping for an electrical contracting business owned by her husband.
The United States Attorney’s Office for the Northern District of Ohio confirmed the sentencing following an in-depth financial investigation by the Cleveland field office of IRS Criminal Investigation.
How Payroll Deductions Were Diverted
Between 2015 and 2021, Butdorf was responsible for withholding federal income taxes, Social Security contributions, and Medicare deductions from employee paychecks.
Under federal tax rules, employers hold these withholdings in trust for the government before remitting them quarterly to the Internal Revenue Service. Instead of transferring the required funds, Butdorf withheld the money from workers while concealing the unpaid balances from the authorities.
Over the course of six years, her failure to remit quarterly payroll withholdings resulted in an unpaid tax loss exceeding $494,000.
Florida Condo and Private Club Spending
Court documents revealed that diverted employee payroll funds were channelled straight into personal accounts controlled by Butdorf and her husband.
Federal investigators traced the stolen payroll money to high-end lifestyle purchases rather than legitimate corporate debts. Among the major expenditures was the acquisition of a residential condominium in Florida.
The diverted funds also financed family holidays, fees at a private recreational camp, and ongoing expenses associated with an exclusive shooting club.
Legal Obligations and Federal Penalties
Federal prosecutors stressed that employee payroll withholdings are legal trust funds, not discretionary business revenue or personal income.
When employers pocket these withholdings, it harms the federal tax system and places employees' future Social Security and retirement records at risk of bureaucratic disruption. IRS investigators emphasised that using trust fund taxes to subsidise personal luxuries remains a priority for federal financial prosecution.
Following her 18-month incarceration, Butdorf will face post-release court supervision along with mandatory financial restitution to repay the outstanding federal tax liabilities.
