Employment Tax Evasion at a Delaware Italian Restaurant

Who Is Domenico Mazzella

Delaware Restaurant Owner

Domenico Mazzella owned and operated an Italian restaurant in Wilmington, Delaware. To customers, the business appeared to be a typical local restaurant with regular staff and steady cash flow.

Investigators say that behind the scenes, payroll and business finances were handled in ways that concealed wages, avoided payroll taxes, and understated personal income over several years.

How the Employment Tax Evasion Scheme Worked

Cash Payroll and Unpaid Employment Taxes

From at least 2017 through 2020, Mazzella allegedly paid some employees entirely in cash. Paying wages in cash is not illegal by itself. The legal problem arises when those wages are not reported and employment taxes are not withheld and paid.

According to prosecutors, Mazzella failed to withhold income tax, Social Security, and Medicare from cash wages, failed to report those wages to the IRS, and failed to pay the employer share of payroll taxes.

By keeping cash payroll off the books, the restaurant’s reported labor costs were lower than reality and required payroll tax deposits were never sent to the government.

Concealing Wages From the Tax Preparer

Investigators also allege that Mazzella did not disclose the cash payroll to his tax preparer. As a result, the restaurant’s tax filings did not reflect the true amount of wages paid or the unpaid employment tax liability.

On paper, the business appeared compliant. In reality, unpaid payroll taxes accumulated year after year.

Diverting More Than $600,000 for Personal Use

Business Funds Moved to Personal Accounts

Employment tax evasion was only part of the case. Prosecutors also focused on how Mazzella transferred money from restaurant bank accounts into his personal accounts.

Over the same period, he allegedly diverted more than $600,000 for his personal benefit. While owners can take money from their businesses, the issue was how these transfers were classified and reported.

False Business Reimbursements

Instead of treating the withdrawals as taxable income or proper owner distributions, Mazzella allegedly labeled them as reimbursements for business expenses.

This inflated the restaurant’s expenses and reduced its reported income. That reduction flowed through to Mazzella’s personal tax returns, resulting in underreported income and underpaid taxes.

Criminal Charges Filed

Federal Tax Crimes

Prosecutors charged Domenico Mazzella with four counts of tax evasion related to his personal and business tax filings and twelve counts of failing to collect, account for, and pay over trust fund taxes tied to employee wages.

Trust fund taxes include withheld income tax, Social Security, and Medicare. The law treats these funds as belonging to employees and the government, not the employer.

Restitution and Potential Penalties

More Than $549,000 Owed to the IRS

As part of the case, Mazzella agreed to pay $549,370.39 in restitution to the IRS. This amount reflects both unpaid employment taxes and underreported income.

Each count of tax evasion and each failure to pay over trust fund taxes can carry up to five years in prison. Actual sentences depend on federal guidelines and case specific factors.

Why the IRS Prioritizes Employment Tax Cases

Employment tax violations harm more than one business owner. Employees may lose Social Security and Medicare credit, the government loses revenue, and honest businesses face unfair competition.

When payroll tax failures are willful and repeated, the IRS and federal prosecutors are more likely to pursue criminal charges rather than civil penalties alone.

Lessons for Business Owners Who Pay in Cash

Mazzella’s case is a warning for restaurants and other cash heavy businesses. Paying employees in cash does not remove payroll tax obligations.

Business owners should run all wages through payroll, withhold and deposit employment taxes on time, maintain accurate records, and fully disclose payment practices to their tax preparer.

Keeping Business and Personal Finances Separate

The case also highlights the danger of treating business bank accounts as personal funds. Mislabeling personal withdrawals as reimbursements is a common trigger for IRS scrutiny.

Best practices include separating accounts, documenting legitimate reimbursements, and correctly reporting owner compensation and distributions.

Conclusion

The Delaware employment tax evasion case involving Domenico Mazzella shows how cash payroll and false reimbursements can escalate into federal tax crimes. What begins as a shortcut can end in criminal charges, large restitution payments, and long term consequences.

For business owners, the lesson is simple. Payroll taxes must be handled correctly and personal income must be reported accurately. Shortcuts in either area carry serious risk.