Sergio Murillo, a resident of Colorado was indicted last week for tax evasion by a federal grand jury sitting in Denver. According to prosecutors, Murillo owned and operated Mountain High Window Cleaning. The indictment alleges that from 2007 through 2010, Murillo willfully evaded federal income taxes by causing clients to pay him in checks written in his name instead of the name of the business. Murillo then allegedly deposited a significant portion of his business payments into his personal bank account. When it came time to file Mountain High Window Cleaning and Murillo to file their federal tax returns, Murillo allegedly failed to include those payments received in his name as income, significantly reducing his taxable income.
According to a press release by the Department of Justice, when IRS employees questioned Murillo about checks written by customers, he allegedly explained that certain customers chose to write him checks personally, rather than to his business. Prosecutors have taken the position that he specifically directed clientele to write checks to him in an effort to willfully avoid federal income tax.
The IRS and Department of Justice will prosecute taxpayers who they feel have made willful attempts to evade or defeat tax assessment. This type of behavior typically involves the inclusion of false information on a tax return or the omission of an item that would increase a taxpayer’s tax liability, like additional income. A taxpayer can also be charged with tax evasion for making willful attempts to evade or otherwise avoid the payment of taxes owed.
In addition to showing the act of evasion on behalf of the defendant, the government must also prove beyond a reasonable doubt that (1) the defendant owed a “substantial income tax” in addition to that which was actually declared on his or her income tax return, (2) the defendant “made an affirmative attempt” to evade or defeat assessment or payment of tax and (3) the defendant’s actions were “willful,” i.e. deliberate. The IRS states that any “voluntary, intentional violation of a known legal duty” is sufficient to fulfill the willfulness requirement.
If convicted of tax evasion, a defendant can face up to five years in prison and criminal fines of up to $100,000 per count. Additionally, those found guilty of tax evasion are typically required to pay restitution and are often sentenced to additional supervised imprisonment.
Although the simple act of depositing business income into a personal bank account does not amount, by itself, to tax evasion, doing so with the intent to conceal income that should be reported on a business tax return could be considered tax evasion by the IRS or a state taxing authority. Businesses that are unsure if their business finance processes and bookkeeping have the potential of creating a criminal or civil tax exposure should consult with an experienced business tax attorney.
Another well-known scheme to attempt to evade taxable income is to take the checks that are written in your name to the bank that the check is written on and cash it. Checks written to a business’s name will not ordinarily be cashed by the bank they are drawn upon. Bankers are very aware of the potential for income tax evasion associated with this method and have been known to require a fingerprint on the canceled check and have been known to issue suspicious activity reports (SARs) to the authorities.
The government is also aware of check cashing services that fraudsters have utilized to try and hide taxable income by converting the checks to their business or to them personally into cash thinking if the cash does not hit their books their accountant will be none the wiser. Many a sting operation has been aimed at these check cashing organizations looking for income tax evaders.
If you are subject to an IRS or state tax examination or criminal tax investigation, or you know for a fact you have used on of these methods to purposely understate your federal or state tax liabilities, it is in your best interest to contact an experienced criminal tax defense attorney as soon as possible. A criminal tax defense attorney has the experience that civil tax professionals are known to have, but also has extensive training in criminal law, criminal tax procedure, and Constitutional law. These additional skill sets can help keep you out of jail and quite possibly get you back into compliance and remove or substantially mitigate the risk of criminal prosecution by using a domestic or foreign voluntary disclosure or through effective eggshell audit defense techniques.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have assisted taxpayers of all walks of life on a myriad of potential civil and criminal tax problems. From individuals to small businesses facing audits or a criminal tax investigation, our zealous advocates work with our clients to develop a cohesive and comprehensive plan of action to both maximize the potential of negative consequences of an audit or investigation and minimize the stress that such an experience can produce. Don’t lose another night of sleep over your potential tax troubles. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
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