When financial professionals come to occupy a place of trust, business owners, employees, and other parties rely on accountants and bookkeepers to faithfully discharge their fiduciary duties. When bookkeepers fail to faithfully and accurately handle income taxes, payroll taxes, and other financial aspects of a business all parties can face serious consequences.
Unfortunately, some bookkeepers and other individuals who come to occupy a position of trust may come to believe, over time, that they are beyond suspicion or beyond reproach for irregularities that may appear in the company finances. Over the years, the fraud may become larger and larger until the situation comes to a head. In some instances, the fraud may be discovered because of a routine review of the company books. In other scenarios, the fraud may only be uncovered due to an IRS or state tax audit.
For years, Deborah Hall, 62, served as a bookkeeper for an Ohio building contractor. In fact, Hall was the longtime bookkeeper for the company with a record of service that stretched back 16 years. Hall’s duties generally consisted of preparing sales tax returns and handling and recording expenses in the company’s accounting software. These activities represent fundamental aspects of the company’s finances. Clearly, Hall had developed a reputation as a trustworthy individual during this time because she was apparently put in charge of the company’s expenditures. To outside appearances, it seemed that all was well at the business.
However, roughly 10 years into her employment, Hall began to engage in an embezzlement scheme. According to statements made by prosecutors, Hall began to write company checks to herself and signed the checks using the signature stamp she was entrusted with. From the start of the scheme in 2009 until her termination in 2014, Hall wrote 154 checks to herself totaling more than $200,000. To conceal her fraud Hall would make false entries in the company books. In one instance, she made a fraudulent entry claiming that the checks were written to cover obligations owed to The Home Depot. In another instance, she falsely recorded in the company books that a check was directed to the state’s treasurer’s office.
Aside from the embezzlement aspect of the bookkeeper’s activities, she also failed to pay taxes on the embezzled funds. While it may seem rather counter-intuitive to tax lay people, the U.S. Tax Code requires citizens and other taxpayers to pay taxes on all income regardless of its source. This means that taxpayers technically have a duty to report and pay taxes on income received related to illegal activities. Taxpayers who fail to pay taxes on all sources of income are subject to civil penalties and criminal prosecution.
On Monday, March 20, 2017, Hall pleaded guilty to one count of bank fraud and one count of tax evasion. Bank fraud can be punished by a prison sentence not to exceed 30 years and a fine not greater than $1 million. Income tax evasion can be punished by a prison sentence of up to 5 years and a penalty of up to $100,000 or $500,000 for a corporation. While Hall has yet to be sentenced, she has already agreed to make full restitution to her former employer and to the IRS.
If you are facing a tax audit that may reveal illegal or improper tax actions or are already facing criminal tax allegations, it is essential to retain competent representation. However, do not go back to your original accountant. If you make disclosures regarding potential criminal conduct, he or she may be subpoenaed and forced to testify against you. If you need to make potential criminal disclosures to make important legal and tax decisions, it is essential that you seek out the guidance of a Criminal Tax Defense Lawyer. Only the attorney-client privilege is sufficient to protect the disclosures you may make in pursuit of obtaining legal advice.
The Criminal Tax Defense Attorneys, CPAs and EAs of the Tax Law Offices of David W. Klasing can take a strategic, coordinated and aggressive approach to defending criminal tax accusations or mere exposure. David Klasing is a dually certified Tax Lawyer and CPA, whom has earned a Master’s Degree in Taxation That can put his more than two decades of practical tax experience and education to work for you. To schedule a reduced rate consultation, please call our Los Angeles or Irvine tax law offices at 800-681-1295 or schedule online today.
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