NEW HANOVER COUNTY — TRU Colors founder George Taylor Jr. will face a year in a minimum security prison for evading over two million in taxes related to his company National Speed.
READ MORE: TRU Colors founder pleads guilty to tax evasion for automotive business
Chief district judge Richard Myers II of the Eastern District of North Carolina made the ruling Wednesday at the Alton Lennon Federal Building in downtown Wilmington. Taylor will pay restitution of $2.3 million to the federal government — the amount the entrepreneur evaded from 2014 to 2021 — plus the “lawful” amount in interest. He will also face three years of supervised release after his 366 day sentence.
Taylor pleaded guilty in August for withholding Social Security, Medicare, and income taxes from employees’ wages and paying those taxes to the IRS from 2014-2021. The entrepreneur invested the unlawfully withheld sum of $2.3 million in National Speed, a business he founded that built out and customized automobiles.
U.S. attorney Mike Easley sought to sentence Taylor with 27 months incarceration. Prosecutors argued a strong sentence was necessary to prevent business owners from engaging in similar practices.
“Absent such deterrence,” Easley and U.S. attorneys Brian Flanagan and Ethan Ontjes wrote in a Nov. 8 sentencing memorandum, “Other successful Americans with the means and opportunity to enrich themselves at the cost of other taxpayers will cynically conclude that the potential rewards of such criminal activity outweigh the risks of being caught and punished for committing tax fraud.”
Flanagan noted Wednesday that National Speed expanded in size during the period of tax evasion and funds were not used to merely “keep the lights on.”
Prosecutors detailed Taylor’s strategy of avoiding taxes, including:
- Falsifying his accounting record to conceal tax fraud from internal bookkeepers and accounting software
- Directing employees to use accounting software to calculate taxes but not make payments or filings to the IRS
- Personally directing the amount of net income for employees — including tax deductions from employee paychecks — despite keeping the funds
- Changing National Speed’s IRS employer identification number to delay filings
- Failure to report income taxes, Social Security taxes, and Medicare taxes withheld from employee’s paychecks for seven years
The U.S. attorneys stated Taylor was fully aware of how to submit employee tax forms for National Speed when it benefitted him; the business owner included the records in his 2020 application to the Paycheck Protection Program.
“Employment tax evasion results in the loss of tax revenue to the United States government and can cause financial hardship to employees in the form of lost or delayed social security or Medicare benefits,” Internal Revenue Service special agent in Charge “Trey” Eakins said in an August Department of Justice statement. “Failure to pay over withheld taxes is a serious offense. Business owners have a responsibility to withhold income taxes for their employees and then remit those taxes to the IRS.”
Myers noted Taylor’s use of the funds as a factor in his ruling. He did not pocket the evaded sum for personal profit but instead used it to support his business and pay employees. However, the judge emphasized Taylor had other options of maintaining his business beyond evading taxes for seven years.
The judge said he was moved by letters received from Taylor’s supporters testifying to the entrepreneur’s character and positive impact on the community. Myers alluded to the influence of another Wilmington-based business Taylor Jr. operated during the period in question, TRU Colors brewery, on the entrepreneur’s mental state in the years he engaged in tax evasion.
“You lost yourself,” the judge said.
Taylor’s attorney, Doug Kingsbery of Raleigh-based Tharrington Smith, argued the ill-fated business venture had a negative impact on his client’s mental health. TRU Colors employed rival gang members in an attempt to curb gang violence, but closed in 2022 amid controversy after alleged gang members broke into Taylor’s son’s home and killed two people in 2021.
Myers accepted Kingsley’s recommendation of FCI Butner as an appropriate correctional facility near Taylor’s family. The judge emphasized the importance of drug and mental health care at the federal prison complex and told Taylor he could recover from this episode.
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