The assets of the eastside woodworking business have been scheduled for sheriff sale on Friday. The IRS in December sued the proprietor.
With the IRS taking its proprietor to court docket and a financial institution pursuing foreclosures, an Erie woodworking business has filed for Chapter eleven bankruptcy safety for the second one time in approximately 15 years.
Dovetail Gallery Inc., 352 E. 18th St., close to Parade Street, filed in U.S. Bankruptcy Court in Erie on Thursday, the day before its assets were to go to a sheriff sale, according to courtroom statistics.
The filing stayed the sheriff sale. Unclear is how the filing will affect the IRS’ Dec. 18 lawsuit in opposition to Dovetail Gallery’s owner, Gary Cacchione.
That match names handiest Cacchione, and now not his commercial enterprise, as a defendant, however the healthy claims that Cacchione failed to properly cope with $317,000 in worker withholding taxes for employees at Dovetail Gallery.
Cacchione has not yet responded to that suit, filed in U.S. District Court in Erie, and on Monday he couldn’t be reached for comment at Dovetail Gallery, which stays open. A man or woman who replied the telephone stated Cacchione turned into not inside the office.
Dovetail Gallery specializes in upscale, custom designed millwork for clients nationwide, inclusive of casinos and restaurants. The business additionally makes furnishings.
Cacchione in 2017 said his business, founded in 1985, had 20 employees. He said he expected to feature 10 personnel soon
In the financial disaster case, Dovetail Gallery in its Chapter 11 petition predicted its wide variety of lenders at one hundred to 199, its property at $500,001 to $1 million and its liabilities additionally at $500,001 to $1 million. The enterprise’ 20 largest unsecured creditors, consistent with the petition, consist of UPMC Health Plan, owed $21,000 for medical health insurance, and GDM LLC, a contractor in Fairfax, Virginia, owed $a hundred and five,000 in a disputed claim.
Other lenders, consistent with court facts, consist of the IRS and the state Department of Revenue, which have filed liens in opposition to Dovetail Gallery. Their claims are expected to be specified in later financial ruin filings.
Another creditor, in keeping with the bankruptcy records filed on Thursday, is Northwest Bank, which holds the mortgage on the Dovetail Gallery belongings and is owed $152,000. Negotiations failed for a “paintings-out agreement” among Northwest and Dovetail Gallery, which led Northwest to pursue a sheriff sale scheduled on the Erie County Courthouse on Friday, in step with courtroom statistics.
Chapter 11 protection allows a debtor to reorganize to pay its lenders through the years. In the case of Dovetail Gallery, a Chapter 11 reorganization will permit the commercial enterprise to live open and “maximize” the cost of its belongings to pay creditors and others, Dovetail Gallery’s bankruptcy lawyer, Michael Kruszewski, wrote in a submitting on Thursday. He could not be reached for comment.
Dovetail Gallery filed for Chapter 11 in October 2003. The case turned into closed in February 2006, in step with court docket records, with a plan for the business to pay its creditors, including the IRS.
In the separate federal match in opposition to Cacchione on Dec. 18, the Department of Justice’s Tax Division, performing on behalf of the IRS, sued Cacchione over claims that he owes $470,000 in taxes, consisting of the $317,000 in worker withholding taxes. The match additionally claims Cacchione owes $153,000 in private taxes based totally on his federal income tax returns for the tax yr 2007 and 2013 through 2016.
The withholding taxes move in the direction of Social Security, Medicare and federal taxes. Employers are required to deduct the quantities from employees’ paychecks and remit the money to the federal government underneath the Federal Insurance Contributions Act, called FICA. Those employment taxes are held in believe for the government.
Employees whose taxes aren’t remitted are not penalized. But section 6672 of the IRS Code, which governs withholding taxes, allows the IRS to penalize “all of us who is required to accumulate, administer and pay over the tax and who willfully fails to accomplish that.”