California Business Owners Who Engage in Tax Fraud Are Identified and Prosecuted

It is probably not a stretch to say that most people have heard friends and family members brag about their apparent ability to short tax payments to the IRS, California Franchise Tax Board, Employment Development Department and other agencies. These individuals brag that the government can’t track their income because of the cash nature of their company or business. They then further double down on their perceived immunity from identification and prosecution by stating that the IRS or other California tax enforcement agencies are more concerned with “bigger fish” anyway.

This mindset is extremely misguided and subjects the business, business owner, all responsible parties, and employees to serious long-term consequences for a short-term “gain” that will need to be repaid when the fraud is discovered. Activities that involve payroll tax fraud can also hurt workers who are often surprised that their under the table wages have affected their eligibility for worker’s compensation and Social Security benefits. Unfortunately, for business owners who engage in this type of fraud, auditors are highly trained and adept at detecting all forms of tax fraud and tax evasion.

California Pizza Business Manager sentenced for insurance fraud, tax evasion

The managers and owners of retail businesses often feel empowered to engage in tax fraud because they thing that there is no way the government can detect tax fraud when cash is involved. This assumption often leads to managers and business owners facing prison time and other harsh sentences when auditors predictably detect the fraud. This is the unfortunate scenario that played out for manager Osama Zawideh of Gabilan Pizza.

Zawideh’s tax and worker’s compensation insurance problems began when investigators from the California Department of Insurance conducted an uninsured employer compliance sweep. The sweep revealed that the business did not have required workers’ compensation insurance. Further inquiry revealed that Zawideh had misrepresented the number of employees at the business when obtaining coverage and understated payroll taxes to the California Employment Development Department. According to prosecutors, the fraud scheme occurred from March 2013 and continued until April 2015.

Zawideh was charged with one count of tax evasion for the payroll tax fraud and with two counts of making a material misrepresentation to obtain a lower rate for workers’ compensation coverage. He recently pleaded guilty to these charges. Zawideh was sentenced to serve 120 days in jail and will face five years of felony probation following his release from jail. Furthermore, Zawideh was sentenced to pay restitution to the workers’ compensation insurance company and to pay fines in excess of $10,000.

Executives of California General Contracting Firm Face Payroll Tax Fraud and Other Charges

The executives of a California-based general contracting firm have been accused by both federal and state investigators of engaging in an array of fraudulent activities including alleged payroll tax fraud and wage theft. The company, NRM Renovations, came under scrutiny in June 2015 after employees filed wage and labor complaints with the U.S. Department of Labor. The company lists global corporations as some of its past clients including Hilton Worldwide, Hilton Resorts, Marriott and Wyndham Hotels.

The CA Department of Industrial Relations (DIR), the CA Department of Insurance (CDI), and the Employment and Development Department (EDD) all collaborated on the investigations that led to the filing of 11 charges against executives Nathan Moore and Sarah Moore. Prosecutors allege that the company failed to pay $30,000 in wages to employees and $250,000 in workers’ compensation premiums to several insurers. Allegations against the company also include unpaid taxes on more than $1,000,000 in unreported wages. Aside from the charges relating to the alleged unemployment insurance fraud, wage theft, and tax fraud (failure to file a return and failure to account and pay over taxes) the executives also face an Aggravated White Collar Crime penalty enhancement under California Penal Code §186.11(a)(3) due to the large sums of money involved.

Facing a Business Tax Audit or Investigation?

If your business is facing a tax audit or is under investigation for tax fraud, going through the process without representation can result in large penalties, fines, or even criminal charges. Working with a dually licensed tax lawyer and CPA, like David Klasing, can allow for more control of the process and the establishment of ground rules that reduce the likelihood of an audit that goes off the rails or expands to scrutinize all areas and practices of your business. David Klasing is a former public auditor so he understands audit techniques and can develop strategies that anticipate auditor requests. To schedule a reduced-rate consultation at the Los Angeles or Orange County offices of the Tax Law Offices of David W. Klasing call 800-681-1295 today or contact us online.