Tax Fraud

Income Tax Evasion Scheme Thwarted By IRS

July 10, 2008 | by Dennis N. Brager

Michael Fuller, an accountant from Florida, and Carl Perry, a food broker from Greenville, South Carolina, were sentenced on May 5, 2008 in federal court for tax evasion. Fuller was found guilty by a jury in July of 2007 and Perry pleaded guilty in May 2007 for conspiracy to defraud the United States pursuant to 18 U.S.C. 371. United States Circuit Judge William Wilkins sentenced Fuller and Perry to twelve months and one day in prison and three years probation, respectively.

Fuller and Perry committed tax evasion during a period from the late 1990’s till 2001. According to the Department of Justice, Perry used offshore accounts and other entities, which were set up by Fuller, to hide income from the Internal Revenue Service (“IRS”). A credit card was also set up with another offshore bank which was funded with Perry’s untaxed income. Fuller filed false income tax returns and other documents with the IRS to hide their tax evasion scheme.

If you have been accused of tax evasion contact the Southern California tax lawyers at Brager Tax Law Group, A P.C.

Tax Evasion and Tacos

July 2, 2008 | by Dennis N. Brager

Apparently there must be a lot of money in tacos. Karl James, a former owner and operator of more than 50 Taco Bell franchises in Southern California and Arizona, was sentenced to serve 36 months in jail and three years of supervised release months for bankruptcy fraud and tax evasion. James was also ordered to pay $1,121,829 to creditors who were victims of the bankruptcy fraud and $1,169,957 to the Internal Revenue Service (IRS) for unpaid taxes.

James, president and CEO of Golden West Tacos, Inc., pled guilty to charges of bankruptcy fraud and tax evasion on October 19, 2005. According to a press release issued by the Department of Justice, James’ tax fraud involved failing to report over $3 million in diverted corporate funds on his personal income tax returns. James concealed the transactions by moving company assets to other company accounts and accounts in the name of others.

If you have been accused of tax fraud or tax evasion contact the Southern California tax lawyers at Brager Tax Law Group, A P.C.

Tax Fraud Scheme Alleged by IRS

June 5, 2008 | by Dennis N. Brager

The Internal Revenue Service (“IRS”) is alleging a massive tax fraud scheme by two European bankers. They have been indicted by a federal grand jury for conspiracy to defraud the IRS pursuant to 18 U.S.C 371. According to the indictment among other things Bradley Birkenfeld, a former USB banker and US citizen, and Mario Staggl, a Liechtenstein citizen and resident, assisted an unnamed United States real estate developer in evading United States income taxes on approximately $200 million of assets held in offshore bank accounts.

The defendants allegedly committed tax fraud by falsifying Swiss Bank documents, by falsifying IRS Forms W-8BEN, by failing to issue IRS Forms 1099, by failing to prepare IRS Forms W-9, and by failing to adhere to the terms of the Qualified Intermediary Agreement with the IRS. The Qualified Intermediary Agreement was a voluntary agreement made between the Swiss Bank and the IRS in 2001 to which the Swiss Bank agreed to identify and document any customers who received reportable United States source income, as well as file appropriate tax documents with the IRS. This agreement was a departure from previous Swiss Bank secrecy laws which concealed bank information for US clients from the IRS. The defendants helped their US clients conceal their ownership of the accounts therefore evading the Swiss Banks obligation to report that information to the IRS.

According to the press release issued by the Department of Justice Tax Division the defendants marketed their services to wealthy United States clients by claiming that Swiss and Liechtenstein bank secrecy was impenetrable and could help their clients evade United States income taxes. The conspirators allegedly assisted their US clients in preparing false IRS documents, advised their clients to destroy any records of offshore bank accounts, and facilitated the filing of false IRS tax returns.

IRS Tax Fraud Charges Upheld

May 30, 2008 | by Dennis N. Brager

The 7th Circuit Court of Appeals refused to dismiss tax fraud charges leveled by the Internal Revenue Service (IRS) at the owner of a small business. United States v. Greve, 490 F.3d 566 (7th Cir. 2007). The case illustrates the perils of representing yourself in a civil tax audit involving significant omissions of income because one never knows when a civil tax audit can turn into a criminal tax problem. The facts were that Mr. Greve operated a snow plow business, and prepared his own tax returns. In preparing those tax returns he omitted a portion of his income. When the tax audit began he proceeded to confess his sins to the IRS tax auditor, but at the same time withheld significant information from her. In addition, he apparently provided false documents to the IRS in the course of the tax audit. To top it off he transferred his home into a trust shortly before the tax audit began.

After the tax audit was part-way done Greve got around to hiring a tax lawyer. The court’s opinion does not disclose whether the tax attorney had experience handling criminal tax problems. The tax attorney met with the IRS agent, and apparently received assurances that the tax audit would be “wrapped up pretty quickly” once certain requested documents were turned over. Behind the scenes, however, the IRS agent was meeting with the Tax Fraud Coordinator, and plotting a criminal tax case. After he was indicted, Greve attempted to have evidence supressed on the theory that his cooperation had been induced by false promises that if he cooperated the matter would be resolved without a referal to the IRS’ Criminal Investigation Divsion (CID). The Court did not see it that way. Although the IRS agent failed to inform Greve that she was considering referring the case for referral to CID the Court held she was not required to do so.

The Greve case illustrates a classic eggshell tax audit, and how treachorous the waters are for those who have omitted signficant income from their tax returns who are picked for a tax audit. For anyone in that situation representation by a skilled tax lawyer is critical.

Southern California Tax Return Preparer Convicted of Tax Fraud

May 16, 2008 | by Dennis N. Brager

A Southern California tax return preparer, Matthew Carl Berry, was convicted of one count of conspiracy to defraud the IRS pursuant to 18 U.S.C 371, and three counts of filing false federal income tax returns. According to the indictment among other things Berry prepared false documents to be used in IRS tax audits. According to the press release issued by the Department of Justice Tax Division’s criminal tax attorneys, Berry prepared fraudulent tax returns by claiming mortgage interest deductions for taxpayers who did not own homes. Berry faces up to 5 years imprisonment, and a fine of up to $250,000 for the conspiracy conviction, and another three years for the criminal tax convictions for filing false income tax returns. Berry could also be subject to civil tax preparer penalties pursuant to Internal Revenue Code § 6694.

If you have concerns about exposure to criminal tax fraud penalties or civil tax fraud penalties contact the tax dispute lawyers at Brager Tax Law Group, A P.C.

Criminal Tax Problems for Ex-New York Yankee

May 14, 2008 | by Dennis N. Brager

David Szen, the former traveling secretary for the New York Yankees, was sentenced on April 4, 2008 to 2 years probation for tax crimes. Szen was also ordered to pay a tax debt of approximately $10,285 in taxes, plus tax penalties and interest, as well as a fine in the amount of $7,500. Szen had waived his right to indictment and plead guilty to one count of filing a false tax return pursuant to Internal Revenue Code § 7206(1). It is likely that Szen will have additional civil tax debts.

According to the IRS, Szen while an employee of the New York Yankees, failed to report tip income of approximately $53,350 on his individual income tax returns for the tax periods 2001 through 2005. The tips came from unidentified players and coaches ranging from a few hundred to $10,000.

Sven took a leave of absence from the Yankees in July of 2007 pending the investigation by the Internal Revenue Service (IRS) Criminal Investigation Division and was later fired by the Yankees after pleading guilty.

Tax Fraud Involves NFL Players

May 8, 2008 | by Dennis N. Brager

Tax lawyers from the Department of Justice are seeking to enjoin two tax return preparers from representing anyone before the Internal Revenue Service (IRS) , acting as tax preparers or engaging in any other tax related conduct. The IRS complaint also seeks an injunction barring the tax preparers from engaging in conduct which is subject to the tax preparer penalties of Internal Revenue Code § 6694. The injunction was requested pursuant to Internal Revenue Code § 7407 and Internal Revenue Code § 7408.

According to the IRS complaint the tax return preparers committed tax fraud by filing fraudulent tax returns, and fraudulent amended tax returns claiming deductions for bogus mining development costs. Interestingly the IRS complaint alleges that 7 of the customers who had fraudulent tax returns prepared were NFL football players. The IRS complaint does not reveal the names of the players, and there is no indication in the complaint that the players knew that tax fraud had been committed.

If you are a tax preparer who has been accused by the IRS of tax fraud, tax evasion or violation of the tax return preparer penalty rules under Internal Revenue Code § 6694 contact the Southern California tax lawyers at Brager Tax Law Group, A P.C. Our tax lawyers represent clients throughout California, including Orange County, the Inland Empire, San Bernardino County, and Riverside County including the cities of Newport Beach, Laguna Beach, San Juan Capistrano, San Clemente, Mission Viejo, Laguna Niguel, Laguna Hills, Dana Point, Huntington Beach, Long Beach, Costa Mesa, Anaheim and Santa Ana.

Fraudulent Offer in Compromise Results in Tax Evasion Conviction

April 16, 2008 | by Dennis N. Brager

Sometimes taxpayers want to be “creative” in filling out IRS Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals). Stephen Miller got too creative, and he was found guilty of tax evasion in violation of Internal Revenue Code § 7201. He was sentenced to 46 months imprisonment. The conviction was upheld by the Court of Appeals. United States v. Stephen Miller (No. 06-11078) (5th Cir. 2008). Miller, who owed the Internal Revenue Service (IRS) about 2 million dollars filed an offer in compromise with the IRS in which he stated he had insufficient assets and income to pay the tax debt. The IRS Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals) he filed stated he only had $40,000 in assets including an IRA with a balance of $25,000. What he didn’t tell the IRS was that he had withdrawn $1,000,000 from his IRA, and transferred it offshore. When the IRS asked about the money taken out of the IRA he responded that the money had been used to pay off a loan Euromex Leasing Corporation in the Isle of Mann. As it turned out Euromex was a shell corporation controlled and formed by a financial planner that Miller consulted to hide his money from the IRS. And how did the IRS find out that it was all a lie? Simple, the financial planner turned Miller in when he wound up with his own tax fraud problems with the IRS.

If you have tax debts and don’t want to be convicted of tax evasion call the tax attorneys at Brager Tax Law Group, A P.C.

Internal Revenue Service (IRS) Convicts Business Owner of Failure to Pay Payroll Taxes

April 4, 2008 | by Dennis N. Brager

A jury found a Colorado man guilty of failure to pay federal payroll taxes pursuant to IRC § 7202 and of filing false payroll tax returns pursuant to IRC § 7206(1). He was, however, acquitted of charges of tax evasion. Failure to pay IRS payroll taxes carries a penalty of up to 5 years in prison, and/or a $10,000 fine per count. Filing false tax returns, including false payroll tax returns carries a penalty of not more than 3 years in federal prison, and/or a $100,000 fine per count.

Like all employers Crabbe was required to file payroll tax returns, and to withhold income income taxes, social security taxes and Medicare taxes from employee paychecks, and to pay those amounts over to the IRS. When he failed to do so he exposed himself to both criminal tax liability, and to the trust fund recovery penalty (TFRP) as well. Once Crabbe has been sentenced it is likely the IRS will go after him to pay the unpaid payroll taxes. In general, responsible corporate officers who willfully fail to pay payroll taxes become personal liable pursuant to IRC § 6672 to pay those taxes. While many business owners get stuck paying corporate payroll taxes out of their own pocket, not too many go to jail for failure to pay. Nevertheless the case is a reminder that in appropriate situations the IRS can and does criminally prosecute people for failure to pay.

If you have payroll tax problems contact the tax attorneys at Brager Tax Law Group.

Franchise Tax Board (FTB) Files Tax Evasion Charges

February 17, 2008 | by Dennis N. Brager

The Franchise Tax Board (FTB) announced that it has filed tax evasion charges against a Diamond Springs, California couple who failed to file income tax returns, and failed to report all of their income from their painting businesses on their California State income tax returns for four years running. According to the press release issued by the FTB the total tax, penalty and interest due is relatively small– $29,000. Nevertheless it is possible that they could be sentenced up to 12 years in jail. The couple was booked into the El Dorado County, California jail.

Clients sometimes ask me whether failing to file tax returns is tax fraud or tax evasion. There is a common belief that it is better not file a tax return at all rather than file an incorrect one. While it is true that at the federal level the IRS Criminal Investigation unit generally prosecutes failure to file cases as misdemeanors that is not always the case. Furthermore, as this press release illustrates the FTB can and does prosecute failure to file a tax return as a felony.

Some clients, and their CPAs also sometimes believe that because the amount of tax owed is small they don’t have to worry about tax fraud charges. While it is certainly true that the larger the amount owed the more likely criminal tax evasion charges become this prosecution demonstrates that even small amounts of tax can result in tax fraud charges being filed by the FTB.