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Former Decatur man sentenced for income tax fraud

A former Decatur man has been sentenced to federal prison for tax fraud in the Eastern District of Texas.

Kenneth Edward Jackson, now living in California, pleaded guilty to false statements on income tax return and was sentenced to 36 months in federal prison, followed by one year of supervised release, by U.S. District Judge Robert W. Schroeder III on May 1. Jackson was also ordered to pay restitution in the amount of $484,187.57 to the IRS and five of his small-business clients.

According to information presented in court, Jackson was the president and owner of Employer Tools and Solutions (ETS), a payroll service provider that operated in Denton County.

ETS filed Forms 940 and 941 on its clients’ behalf and made payroll and payroll tax payments using funds provided by its clients. Part of ETS’s function in processing its clients’ payroll was holding and remitting employment tax to the Internal Revenue Service for its clients.

Employment tax consists of trust fund taxes, which are items withheld from employees’ paychecks, and the employer portion of taxes.

From 2017 to 2019, Jackson embezzled at least $185,841.04 of trust funds and at least $114,273.98 of the employer’s portion of taxes from his clients, according to federal court records. He took funds provided by various clients for employment taxes and failed to pay the money over to the IRS. Instead, he kept this money and used it to pay bills—including payments on his home—and to fund his lifestyle—including a European vacation, according to court documents. Jackson also failed to report the client funds he embezzled as income on his U.S. Individual Income Tax return.

“As a payroll service provider, Jackson’s clients trusted him to honestly handle their finances,” said U.S. Attorney Damien M. Diggs. “But Jackson allowed his greed to overtake his fiduciary duties. In addition to defrauding the United States, he also preyed upon his own clients to support his opulent lifestyle. We are grateful for our partners at the IRS, who not only protect our nation’s treasury, but also victims of financial fraud.”

The case was investigated by the Internal Revenue Service Criminal Investigation (CI) and the Frisco Police Department and prosecuted by Assistant U.S. Attorney Sean J. Taylor.

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