As the IRS continues to investigate and prosecute tax evasion schemes at a growing rate, brothers-in-law Assad Baragzai and Rajesh Mathew are two of the most recent defendants to be criminally prosecuted for tax crimes.
Both Baragzai and Mathew pleaded guilty in recent months to making and subscribing false returns after underreporting income from their separate coffee stand chains in Washington State. Baragzai gave his tax preparer false income information for five years, leading to an estimated $1.7 million in tax losses to the IRS. Baragzai disputes this amount despite pleading guilty.
Baragzai and Mathew face up to three years in prison, the maximum sentence for the charges. Their sentencing dates have not been held yet, but both defendants agreed to pay restitution to the IRS as part of their plea agreements.
In addition to investigating and prosecuting Baragzai and Mathew for criminal tax violations, the IRS could still impose penalties for failure to pay and interest on the unpaid tax.
For help with your civil or criminal tax issues from the Tax Law Offices of David W. Klasing, call our Dual Licensed Tax Attorneys and CPAs today at (800) 681-1295 or click here to arrange a reduced rate initial consultation.
Two Tax Schemes Foiled by the IRS, Defendants Plead Guilty
Despite their attempts to hide income from their separate coffee chains, the IRS recently investigated and prosecuted Assad Baragzai and Rajesh Mathew for making false returns. The defendants await sentencing and risk spending years in prison and paying huge sums in restitution and financial penalties.
Failure to Report
While owning a chain of drive-thru coffee stands in Auburn and the surrounding area, Assad Baragzai failed to report nearly $6 million in income on his tax returns between 2016 and 2022. During those years, Baragzai underreported his earnings to his accountant, resulting in false returns filed with the IRS. Because Baragzai underreported his income, he ultimately paid less in taxes for those years.
Baragzai’s brother-in-law, Rajesh Mathew, was also involved in the case, pleading guilty to similar charges in March 2024 for making and subscribing false returns. Mathew also owned a string of coffee stands in the area, following a similar scheme as Baragzai to underreport income to the IRS to avoid paying taxes. Baragzai followed Mathew in pleading guilty to the charges on August 29, 2024.
The IRS uses various automated tools and statistical analysis systems to examine tax returns and identify issues. Advancements in computer technology and artificial intelligence make it easier than ever for IRS agents to flag returns for an audit or criminal tax investigation.
Any attempt to fraudulently understate the taxable income on a taxpayer’s return is more likely than ever to trigger an audit or criminal tax investigation. In Baragzai’s case, he fraudulently underreported his income for a five-year period despite owning a profitable chain of coffee drive-thru stands. The IRS’s automated statistical analysis of his returns over time likely alerted IRS agents to the situation which garnered a closer look into his income and finances. In addition to catching fraudulent or false returns via audits, the IRS gets criminal tax investigation tips through third parties, like state taxing authorities, financial institutions, whistleblowers, disgruntled employees and through key word searches of divorce court public records.
Tax Loss to the IRS
According to the plea agreement and the government’s estimations, Baragzai’s scheme resulted in about $1.7 million in tax loss over the five years he did not file accurate returns. Baragzai disputes this estimation, claiming that the tax loss to the government is closer to $1.3 million despite pleading guilty to the charges. The judge will settle this disputed amount on Baragzai’s sentencing date. The actual tax loss will inform the restitution Baragzai and Mathew must pay to the IRS.
Upcoming Sentencing
According to the terms of the plea agreement, both Baragzai and Mathew face up to three years in prison for their tax schemes. The judge will decide whether or not they receive this prison sentence at each defendant’s sentencing. Baragzai will be sentenced on November 8, 2024, while Mathew will be sentenced on October 9.
According to 26 U.S.C. § 7206, a three-year sentence is the maximum consequence for filing or subscribing to a false return. Five tax returns are at issue which equates to a potential for a 15-year jail sentence. In addition to potentially serving time in prison, both Baragzai and Mathew could face fines and could be forced to pay prosecution costs.
Furthermore, according to the plea agreement, both defendants agreed to pay restitution to the IRS. In addition to seeking criminal consequences for these schemes, the IRS will impose financial penalties and interest for the tax loss (Restitution).
For example, the IRS could impose a penalty for failure to pay, which should not exceed 25% of a taxpayer’s unpaid taxes. The IRS often uses civil penalties to alert taxpayers to an issue and might only proceed with criminal cases in instances of egregious tax violations.
Again, because of enormous IRS budget increases and modern advancements in the IRS’s ability to process returns and analyze financial information, the agency has been able to investigate and prosecute tax violations at a higher rate. If Baragzai and Mathew receive the maximum sentence despite pleading guilty, it could further solidify the IRS’s commitment to holding all taxpayers accountable and indicate how others facing similar charges could be sentenced.
Call Us Today for Help with Your Case
For help with your case from Tax Law Offices of David W. Klasing, call our Dual Licensed Tax Attorneys and CPAs today at (800) 681-1295 or click here to arrange a reduced rate initial consultation.
