According to a Department of Justice press release, Kenneth Taylor, a resident of California, will spend the next three years in a federal prison for his role in a scheme to issue fake financial instruments and his own personal tax fraud. This story illustrates the notion that income, even from illegal sources, must be included on your tax return on an annual basis.
Prosecutors alleged that Taylor operated, along with two other co-defendants, Success Bullion USA, LLC (SBUSA), an entity that was set up to appear related to a large Hong Kong financial institution. SBUSA fraudulently sold customers standby letters of credit and proof of funds statements needed for various business purposes. SBUSA customers did not have the assets that were indicated in the instruments provided by SBUSA. Furthermore, the instruments reported fake creditworthiness that no other institution would have issued.
SBUSA established a website that was intended to deceive other businesses into believing that it was part of a larger network of banks headquartered in Hong Kong. The fake financial instruments were sent to other banks in a format that made the instruments unenforceable. Proceeds received from clients were deposited in a bank account in Belize that Taylor controlled. Taylor failed to include the profits that he obtained illegally through the scheme in his individual income tax return. Taylor and his co-conspirators pleaded guilty to conspiracy to commit wire fraud and wire fraud. Additionally, Taylor pleaded guilty to tax fraud.
In addition to serving 36 months in prison, Taylor was ordered to pay $90,000 to a victim restitution fund, as well as over $1.1 million to the IRS in restitution to make up for tax loss suffered by the government. Finally, Taylor was also ordered to serve three years of supervised release upon the completion of his incarceration in federal prison.
Whether you earn your income as a wage earner who is issued a W-2, an independent contractor who is issued a 1099, or in rare cases, or someone who has had an accession to wealth without receiving any tax form, you are required to report your gross income as a part of your individual tax return each year. The failure to properly report and pay taxes on income “from whatever source derived” can easily result in the filing of criminal tax charges. If you have failed to file your tax returns or underreported income, it is in your best interest to contact an experienced tax defense attorney.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience representing taxpayers from all walks of life. Whether you are a business owner facing a sales and use tax audit or you have received notice that your individual return is being examined, our team of zealous advocates are standing by to help you develop a sound legal strategy that will keep your personal and financial interests at the forefront of importance. Do not lose sleep over the possibility of tax evasion or other tax-related charges from the IRS or state taxing authorities. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
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