A Republican candidate for Congress who promotes his fiscal responsibility and experience as a small businessman did not pay his employees' payroll taxes last year and now faces a $307,000 IRS lien.

Bruce O'Donoghue of Winter Park — one of the leading candidates trying to unseat Democrat firebrand U.S. Rep. Alan Grayson — told the Orlando Sentinel that he's the victim of a former employee who embezzled from his company.

Records show the Internal Revenue Service has filed a federal tax lien against his business, Control Specialists Co., totaling $306,975 in taxes, interest and penalties. According to the lien, the business failed to forward to the IRS payroll taxes in any quarter last year.

The business, which employees about 50 people, builds and installs traffic signals, crosswalks, digital information signs and other traffic equipment, often for local governments. The company was started in 1965 by O'Donoghue's parents, and he has been president and CEO since 1990.

O'Donoghue blamed the company's chief financial officer, who has since been fired. He said the employee stole company funds that apparently include the taxes withheld from workers' wages.

O'Donoghue said he didn't learn about the embezzlement until after the CFO's termination, when an accountant was going through the company books. About the same time, he was contacted by the IRS about the payroll taxes.

"We had a CFO who clearly misappropriated funds. We didn't learn about it until after he'd been terminated," O'Donoghue said. "We were shell-shocked."

O'Donoghue said his business has never faced a tax lien in its 45-year-history.

He declined to reveal the name of the company's former CFO and said he had not filed criminal charges against his former employee.

Control Specialists Co.'s insurance company is conducting a forensic audit of the business' accounts, he said. Once they figure out how much money was stolen, he said, he plans to file charges.

In the meantime, O'Donoghue said he and his attorney have been negotiating a repayment plan with the IRS.

"We have been working cooperatively with the IRS, and we're very close to a final resolution on the matter," he said. "They're going out of their way to help us because they know what happened. We've been completely transparent."

Lance Snodgrass, a tax consultant hired by O'Donoghue, said the IRS is close to approving a plan that would have Control Specialists Co. repay the taxes and interest but forgive additional penalty charges because of the circumstances.

An IRS spokesman would not release any details about the business' tax bill or the status of its negotiations.

O'Donoghue is one of seven Republicans in the Aug. 24 Republican primary in Florida's 8th Congressional District. The winner will face Grayson and Florida Tea Party candidate Peg Dunmire in the general election.

Mark Schlueb can be reached at mschlueb@orlandosentinel.com or 407-420-5417.