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Can Tax Evasion and Bankruptcy Fraud be Criminally Charged Together?

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Can Tax Evasion and Bankruptcy Fraud be Criminally Charged Together?

Bankruptcy and IRS tax fraud cases can sometimes become intertwined, as it is a common practice for high-income taxpayers to attempt to use bankruptcy to reduce associated tax liabilities. The IRS has a special area within its criminal investigation unit known as the “Bankruptcy Fraud Program” that works on cases related to bankruptcies where assets are being concealed, and full tax liability is not being paid. In these cases, tax evasion charges will often be brought in addition to charges of bankruptcy fraud. At the Tax Law Offices of David W. Klasing, our lawyers have been monitoring the developments of a recent court case. Our lawyers ready and able to fight for your innocence if you have been charged with bankruptcy fraud, tax evasion, or both.

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What is Bankruptcy Fraud?

Bankruptcy fraud occurs when you file for bankruptcy without giving an accurate accounting of your assets. This can have effects on taxes as well as other issues related to bankruptcy. According to the IRS, the Bankruptcy Fraud Program, within its criminal investigation unit, has three main goals. The first is to “increase voluntary compliance with federal tax laws through the prosecution of those committing significant crimes in the bankruptcy arena.” The second is to “enhance IRS presence among bankruptcy professionals and practitioners with the dual purpose of increasing compliance and providing contact points to report allegations of fraud.” The final goal is “to foster enhanced cooperation between the IRS operating and other federal and state criminal investigation divisions to attain mutual compliance goals.”

Bankruptcy and tax fraud convictions can come with severe penalties, including jail sentences. The best thing you can do to prevent this is to consult with an experienced Tax and Bankruptcy Lawyer like those at the Tax Law Offices of David W. Klasing before filing for bankruptcy. We will work to ensure that everything is filed correctly and that you are not exposing yourself to civil or criminal liability. If you have already filed using incomplete or false information, we can work with the IRS and the courts to get you back into compliance with the most minimal possible civil penalties being imposed and potentially avoid criminal prosecution if an tax or bankruptcy fraud investigation or audit is not currently underway.

What is Tax Evasion?

Tax evasion is a tax crime that ordinarily occurs when a taxpayer deliberately attempts to cheat the system and pay lower taxes by underreporting income, by claiming deductions for which they are not eligible, or by engaging in other acts involving false or misleading information on their returns that would lead to a tax assessment. Tax evasion can occur through trying to evade tax assessment or criminally attempting to avoid the actual payment of tax. The former occurs when you underreport income, claim false deductions, etc., to get a lower tax assessment, while the latter happens when you try to conceal your assets or accounts to avoid paying taxes that have already been assessed.

If an IRS agent suspects tax evasion is occurring after reviewing your returns, they may refer the case to an auditor or to the IRS criminal investigation unit. Just like all tax crimes, the prosecution must prove that you willfully evaded taxes and that your actions were not only the results of mistake or ignorance. A skilled Tax Attorney like those at the Tax Law Offices of David W. Klasing can work to ensure your taxes are correctly filed to avoid an audit. Our lawyers can help you resolve an audit or IRS criminal tax investigation without your having to face the most severe criminal & civil penalties if one had already been opened.

The Franconeri Case

One recent case shows how a person can face both bankruptcy charges and tax evasion charges for the same course of behavior. The case, out of the District Court of New Jersey, involves the conduct of a man named Patrick Franconeri, who owned several construction companies throughout the state of New Jersey. The indictment against him alleged that he deliberately underreported or failed to report income and assets for the purposes of tax assessments, tax collections, as well as his 2010 bankruptcy filing.

When Franconeri filed for bankruptcy in 2010, the indictment alleged that he knowingly concealed the existence of some properties and some of his construction companies from the bankruptcy proceedings, and on his tax filings leading to far lower tax assessments than he should have paid. Further, during the 2014 tax year, as a result of the operation of the construction companies, Franconeri earned a taxable income of $1,362,950, which should have resulted in income taxes owed to the IRS of $558,439. Franconeri did not file a tax return that year. In other years, he took actions to conceal his income from the IRS, such as cashing checks at check-cashing stores, where he believed his transactions would fly under the radar.

In the end, the evidence against Franconeri was strong enough that he chose to take a deal and avoid trial. He ended up pleading guilty to one count of tax evasion and one count of concealment of assets in bankruptcy. This led the judge to sentence him to 18 months in prison and order him to pay restitution of $716,569 to the victims of his bankruptcy offense and $558,349 in restitution to the IRS.

If You Are Concerned About Bankruptcy Fraud of Tax Evasion Charges, Call Our Skilled Tax and Bankruptcy Attorneys Today

As the Franconeri case illustrates, bankruptcy fraud and tax evasion can come with severe penalties, including a length jail stay, especially when they are charged together. If you believe that you have left yourself open to such charges, you should contact a battle-tested Tax and Bankruptcy Attorney like those at the Tax Law Offices of David W. Klasing as soon as possible. We will leave no stone unturned, working to bring your case to the best possible resolution. To set up a consultation, call us today at (800) 681-1295.

Regardless of your business or individual tax needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business and our team will help ensure that your business is too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.

In addition to our main office in Irvine,  the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los Angeles, San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, Carlsbad and Sacramento. During the COVID-19 pandemic, our staff are working from home, but have full virtual meeting capability.

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