U.S. citizens, legal permanent residents and others with sufficient links to the United States must file taxes, pay taxes, and otherwise ensure that they satisfy all aspects of their duties and obligations as a taxpayer. As taxpayers, we expect that everyone will pay their fair share and will dutifully file and pay taxes. Unfortunately, in practice, there will always be those who attempt to evade paying their fair share or paying at all. Typically, these individuals will try to conceal income or their failure to pay their full tax obligation through a variety of means. For some non-compliant taxpayers, they may believe that their social standing, occupation, or office will inoculate them from scrutiny and potential enforcement actions.
This belief is, however, wholly and completely unfounded. The IRS is a data-driven organization that bases its decisions to audit, investigate, or referral for criminal prosecution on the information it receives from a variety of sources. Data of this type has been used to indict the current auditor for Washington state on tax fraud. Furthermore, careful data analysis has led to other tax charges and convictions against community pillars such as doctors, lawyers and prominent individuals in the business community.
Federal prosecutors believe that Washington state auditor, Troy X. Kelly, participated in a fraudulent scheme through his company Post Closing. This scheme involved the failure to return excess fees to the purchaser from the processing of mortgage and re-conveyance documents. Prosecutors alleged that Post Closing kept more than $2 million it was supposed to return to consumers.
After the civil part of this matter was settled for more than $1 million, prosecutors allege that Mr. Kelly began transferring the sum of $245,000 to another bank account under his control every year. While Mr. Kelly claims that these funds were from one of his other business ventures, prosecutors allege that these funds are the ill-gotten and concealed income from the Post Closing business transactions. Furthermore, prosecutors allege that Mr. Kelly wrongfully attempted to convert and claim nearly $70,000 in personal expenses as business deductions.
Mr. Kelly currently faces charges for corrupt interference with the administration of tax laws, two counts of filing false income tax returns, and one count of making a false statement to an IRS agent. Each of these charges includes the possibility of imprisonment with the charge of lying to an IRS agent carrying the harshest potential prison sentence of five years. For each of the other counts faced by Mr. Kelly, upon conviction, he could face up to three years in prison.
Elected officials are not unique; doctors, lawyers, businessmen and businesswoman will also find that their status does not create immunity from an enforcement action. Consider the case of Matthew Libous, the son of a state Senator and an attorney licensed to practice in New York. Mr. Libous was convicted of filing false tax returns because of his underreporting of his law firm’s income for the tax years between 2007 and 2009. The unreported income totaled to nearly $70,000. Mr. Libous could face up to 9 years in prison when he is sentenced on each of the three years he failed to file accurately.
Further consider the tax conviction of emergency medical and urgent care doctor, Michael Mangold. Dr. Mangold was sentenced to an eighteen-month prison sentence after being convicted of tax evasion and making false statements. For roughly a ten-year period, from 1997 to 2007, Dr. Mangold filed false income tax returns to conceal his income. Furthermore, Dr. Mangold engaged in frivolous litigation
Finally, consider the tax case of attorney William Weisberg. Mr. Weisberg was convicted for a willful failure to pay tax due and owing and was sentenced to serve one year and one day in prison and to pay approximately $450,000 in restitution. Court filings show that Mr. Weisberg’s voluntary or intentional failure to satisfy this known legal duty was likely due to financing his extravagant lifestyle. When the IRS attempted to work out a payment plan with Mr. Weisberg, he instead sent a fraudulent document that purported to be from his law firm. The letter stated that the firm was already garnishing money from Mr. Weisberg’s paycheck to pay back the IRS, but no such action had actually been taken.
If you are concerned that you may have taken overly aggressive tax positions or that you may have failed to satisfy the full extent of your tax obligation, The Tax Law Offices of David W. Klasing may be able to help. To schedule a reduced-rate consultation with an experienced Tax Lawyer call, 800-681-1295 today or contact us online.