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Arkansas Business Owner Pleads Guilty to Filing a False Tax Return

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    According to a Department of Justice press release, an Arkansas man recently plead guilty to filing a false tax return after he failed to report approximately $1 million in business income. This story should serve as a reminder to those taxpayers who operate businesses that primarily accept cash or checks that underreporting the true income of your business may be tempting but stressing over the potential civil and criminal repercussions vastly outweigh the benefits gained by filing a fraudulent tax return. If you have failed to file a tax return for one or more years, or have filed a tax return that under-reports income that would potentially be found in an audit, eggshell audit, reverse egg shell audit or criminal tax investigation, it is in your best interest to contact an experienced tax defense attorney as soon as possible to discuss your options in coming back into compliance.

    All it takes is $10,000 of unreported income to cause your auditor to associate in a technical fraud advisor whose sole job it is to work up your case for hand off to the criminal investigation division of the IRS. If the criminal investigation division accepts your case, you have a 90% probability of going to jail no matter how gifted and talented your criminal tax defense attorney is.

    Note: As long as a taxpayer that has willfully committed tax crimes (potentially including understating income or overstating deductions, coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosurebefore the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply. 

    It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.

    Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.

    As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, KovelCPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!

    Defendant Cashed Business Checks, Failed to Reported True Income

    Court records reveal that Pedro Garcia was the owner and operator of Garcia Lawn Care. Between 2014 and 2020, federal prosecutors alleged that the lawn care service brought in substantial amounts of income, primarily in the form of checks. Garcia admitted to cashing the checks but not reporting the true amount of business profits on his individual tax return for the tax years at issue. Prosecutors estimated that Garcia underreported income by $1 million, causing an estimated income tax loss of over $200,000.

    Garcia will be sentenced at a later date but faces up to three years in federal prison. Additionally, Garcia may be ordered to serve a period of supervised release upon the completion of his physical incarceration. Lastly, Garcia will likely be ordered to pay restitution to the IRS, representing the tax loss that he caused.

    Keeping Your Cash or Check-Based Business Above Board

    There are many types of businesses that deal extensively in cash or checks. There is nothing illegal about operating such a business. But there is no denying that for certain cash or check-based businesses, there is a temptation to underreport income which is well known to the taxing authorities. Revenue under reporting fraud is driven primarily by the misconception that the IRS cannot prove that a customer paid $100 in cash, rather than $20. Federal and state tax authorities have been developing strategies to detect the underreporting of cash and check based income in such businesses for decades. Tactics include direct observation and imputing income based on business costs. Federal and State tax authorities are well armed with strategies and have tons of experience in detecting and prosecuting such illegal activity.

    If you own a cash intensive business and have filed tax returns that underreport income, inaccurately inflates deductions, or if you simply have not filed a tax return for one or more years, you should contact an experienced criminal tax defense attorney as soon as possible. Working with your seasoned tax lawyer, you will determine the level of civil and/or criminal exposure and jointly determine the best strategy to bring you into tax compliance and remove the risk of criminal tax prosecution. If you are under audit or criminal tax investigation make sure you are represented by experienced tax counsel, as it could destroy your life to go up against the IRS or State taxing authorities alone where you have substantially underreported income or overstated deductions.

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