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FOR IMMEDIATE RELEASE: December 1, 2010

SCHUMER CALLS ON IRS TO PROVIDE RELIEF TO SOUTHERN TIER SMALL BUSINESSES ALLEGEDLY SCAMMED BY AEDEN WATERFORD; SENATOR CALLS ON AGENCY TO USE ALL AVAILABLE TOOLS TO HELP VICTIMS

Aeden Waterford Was Hired by Southern Tier Businesses to Manage Payroll Taxes, But Firm Allegedly Failed to Follow Through with Payments Leaving Businesses in Default

Schumer Calls on IRS to Reduce Payments Owed, Waive Interest and Penalties, and Provide Expert Assistance

Schumer: IRS Should Not Hold Businesses Down While They Get Back on Their Feet

Today, U.S. Senator Charles E. Schumer released a letter to Doug Shulman, Commissioner of the Internal Revenue Service (IRS) that urges the agency to use all its available resources to aid Southern Tier small businesses who were allegedly scammed by the payroll firm Aeden Waterford, when the company failed to process the businesses payroll taxes as promised. Right now, many of the firms that used Aeden Waterford are currently in collection or default by the IRS in some cases, owing thousands of dollars that they thought were already paid. In other cases, businesses have taken loans or sought other cost cutting measures to pay tax obligations for a second time. In his letter, Schumer emphasized that such payments and penalties are hurting the businesses’ ability to create jobs and grow the region’s economy.  Specifically Schumer said the IRS should reduce, to the maximum amount allowed by law, the principal owed by businesses; eliminate any interest and penalties owed; allow for lenient payment plans; and provide the businesses with access to assistance from high level IRS officials; and assure the businesses that they will not be the subject to future audits. 

“These businesses were blindsided, plain and simple, and the IRS should be helping them, not treating them as criminals,” Schumer said. “The IRS should be doing everything in its legal power to reduce their burdens and alleviate their payments. 

Aeden Waterford was a payroll services company located in Binghamton. They operated under this name from 2006 until 2010.  They listed themselves as a Professional Employer Organization (PEO) and stated on their website that pursuant to New York State requirements, they were annually audited by an independent source and required to be bonded.  The head of the company was named William Stiles. There is no clear estimate of how many clients this firm had; Mr. Stiles reportedly told one of his clients that he had more than 100. While Senator Schumer’s office has heard from many former clients, it is not clear how many businesses utilized the services of Aeden Waterford.

In mid-August 2010, Aiden Waterford’s clients received a letter from Mr. Stiles stating that Aeden Waterford was closing, and all accounts were being transferred to Paychex.  Many clients simply assumed that the business was being sold.  In addition, several clients received a personal call from Mr. Stiles letting them know of the situation.  On September 30, 2010, clients received a second letter from Mr. Stiles stating that Aeden Waterford had failed to remit all the federal taxes the clients had paid for the second and third quarters. This letter at the end of September was the first time that the clients were made aware that their timely tax payments had not been forwarded to the government.

At that point, many clients called the IRS the day following the letter and were told that they were in collection or default - but this was a contact initiated by the clients. The first official contact from the IRS for many of the clients came on October 29, 2010.  This correspondence, from a separate unit in Syracuse, detailed a criminal investigation the IRS was launching into Mr. Stiles; it did not provide guidance related to the clients’ own tax liabilities.  Several clients believe that as a PEO, Mr. Stiles had changed the address for many of the clients, so some IRS correspondence had been diverted to a post office box, rather than the client’s actual place of business. Because of this change of address, it proved difficult for several clients to obtain the information that they needed from the IRS about their arrears, since the addresses did not match IRS records.

Schumer and his office have been in discussions with the IRS and affected businesses for the last several weeks, establishing what can be done to assist these businesses.  Today Schumer released his specific recommendation:

1)      The IRS should utilize to the greatest extent possible the authority granted under the “Offer in Compromise” program to reduce the amount these companies owe.  An offer in compromise (OIC) is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed, based on a business’s ability to pay.

2)      The IRS should waive all interest and penalties. Fundamental fairness requires the IRS to exercise whatever discretion it has to help these innocent victims. It is simply not right to charge interest and penalties when it took so long to the notify the businesses of the problem

3)      The IRS should provide all affected businesses with as lenient a payment plan as possible.

4)      IRS should assure that Aeden Waterford victims that they will never be flagged for future audits.

5)      Finally, for any further investigation, the IRS should heed the victims request and assign a senior IRS official  as a direct contact for business owners that were defrauded, so that any relevant information about this problem is quickly shared with the victims.

In his letter Schumer wrote, “…the failure of this one firm is having a devastating impact on the affected businesses. The companies that have contacted me owe varying amounts – some owe less than $1,000 of payroll taxes while at least one employer owes $24,000 – but this is money that they thought they had already paid.  Now these companies cannot use this money for investments or new employees, and some are taking out loans or borrowing against their retirement plans in order to make their payments.  In some cases, it may force these companies to initiate layoffs that would not otherwise have been necessary.”

The full text of Schumer letter can be seen below:

December 1, 2010

Mr. Doug Shulman, Commissioner

Internal Revenue Service

1111 Constitution Avenue, NW

Washington, DC 20224

Dear Commissioner Shulman,

I write to you today in regards to Aeden Waterford, Inc., a former human resource services provider in my state that specialized in human resource administration, employee benefits, and payroll services. In recent months, it has become apparent that numerous clients – mostly small businesses – were victimized by this company, which failed to remit certain payroll taxes that the businesses had paid.  These constituent business owners now find themselves in a very difficult situation, and I am urging the Internal Revenue Service to provide whatever relief is possible under the law.

My staff has met with and heard from many of the victims of Aeden Waterford.  Here is the fact pattern as best they have been able to ascertain.

Aeden Waterford was a payroll services company located in Binghamton, NY. They operated under this name from 2006 until 2010.  They listed themselves as a Professional Employer Organization (PEO) and stated on their website that pursuant to New York State requirements, they were annually audited by an independent source and required to be bonded.  The head of the company was named William Stiles. There is no clear estimate of how many clients this firm had; Mr. Stiles reportedly told one of his clients that he had more than 100. While my office has heard from many former clients, we have not been able to identify all those who utilized the services of Aeden Waterford and our information has been provided by those who have contacted my office.

In mid-August 2010, Aiden Waterford’s clients received a letter from Mr. Stiles stating that Aeden Waterford was closing, and all accounts were being transferred to Paychex.  Many clients simply assumed that the business was being sold.  In addition, several clients received a personal call from Mr. Stiles letting them know of the situation.  On September 30, 2010, clients received a second letter from Mr. Stiles stating that Aiden Waterford had failed to remit all the federal taxes the clients had paid for the second and third quarters. This letter at the end of September was the first time that the clients were made aware that their timely tax payments had not been forwarded to the government.

At that point, many clients called the IRS the day following the letter and were told that they were in collection or default, but this was a contact initiated by the clients. The first official contact from the IRS for many of the clients came on October 29, 2010.  This correspondence, from a separate unit in Syracuse, detailed a criminal investigation the IRS was launching into Mr. Stiles; it did not provide guidance related to the clients’ own tax liabilities.  Several clients believe that as a PEO, Mr. Stiles had changed the address for many of the clients, so some IRS correspondence had been diverted to a post office box, rather than the client’s actual place of business. Because of this change of address, it proved difficult for several clients to obtain the information that they needed from the IRS about their arrears, since the addresses did not match IRS records.

As you might imagine, the failure of this one firm is having a devastating impact on the affected businesses. The companies that have contacted me owe varying amounts – some owe less than $1,000 of payroll taxes while at least one employer owes $24,000 – but this is money that they thought they had already paid.  Now these companies cannot use this money for investments or new employees, and some are taking out loans or borrowing against their retirement plans in order to make their payments.  In some cases, it may force these companies to initiate layoffs that would not otherwise have been necessary.  I am sure you can understand why this is causing additional stress to an already disastrous situation for our local business owners.

In my position as a senior Senator on the Senate Finance Committee, I have often fought against unfair treatment and pro-consumer measures when it comes to IRS practices  I have several requests for the IRS in regards to this situation.

First, I believe it is only fair that the IRS provide all affected businesses with as lenient a payment plan as possible.  The IRS should even consider utilizing the authority granted under the Offer and Compromise program to reduce the amount these companies owe given that many of these companies have been struggling during difficult economic times, and they now have to make certain tax payments twice.  Second, I request that the IRS waive all interest and penalties. Fundamental fairness requires the IRS to exercise whatever discretion it has to help these innocent victims. It is simply not right to charge interest and penalties when it took so long to notify the taxpayer of the problem. Third, I know that IRS would never flag these businesses for future audits, but it would be very helpful if the IRS could assure the victims that this is the case. Finally, for any further IRS investigation, the victims would like a senior IRS official to be assigned as a direct contact for business owners that were defrauded, such that so that any relevant information about this problem is quickly shared with the victims.

I want to thank you for your attention to this matter, and I look forward to hearing from you.

                                                                        Sincerely,

                                                                        Charles E. Schumer

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