Back in March, our criminal tax defense lawyers profiled the case of Connecticut salesman Ira Malkin, who in February 2018 pleaded guilty to one count of tax evasion. The crime to which Malkin confessed was part of a long-running scheme to avoid the defendant’s federal income tax liabilities, which Malkin achieved – at least, for a time – by causing Good Copy Printing Center Inc. (GCP), the company Malkin worked for, to reduce his commissions, resulting in dramatic underreporting of income on Forms W-2 (Wage and Tax Statement) filed by GCP with the Internal Revenue Service (IRS). At the time of our original article, Malkin was awaiting sentencing. We now have updates on the outcome, in addition to new information on a related case against GCP’s owner, 71-year-old Louis Goldberg – who also happened to be Malkin’s uncle.
According to the Department of Justice’s initial press release, “Between approximately 2003 and 2012, GCP paid many of Malkin’s personal expenses.” During this time, Malkin authorized GCP to reduce his commissions accordingly. Consequently, when GCP filed with the IRS its Forms W-2 (which are used by employers to report employee wages), Malkin’s earnings were reported as being substantially lower than they actually were.
How “substantially”? Malkin’s income was underreported by approximately $1.5 million. Because the government cannot tax income of which it is unaware, Malkin managed to avoid paying approximately $484,581 in federal income taxes.
Though devastating, fines are seldom the only penalties handed down in tax evasion cases. Like many tax defendants, Malkin was also sentenced to time behind bars. His sentence, which began October 11, 2018, will span six months in federal prison, to be followed by three years of supervised release, a common penalty in tax evasion cases. Similar to the terms of probation or parole, supervised release imposes a set of conditions and restrictions which the offender must comply with – or face additional penalties. In Malkin’s case, for instance, supervised release entails six months of “home confinement” (i.e. house arrest) and 200 hours of mandatory community service. Malkin’s sentence was handed down by Chief U.S. District Judge Janet C. Hall.
On September 7, 2018, approximately one month after Malkin was sentenced, GCP owner Louis Goldberg pleaded guilty to a related tax offense: aiding and assisting in the filing of a false tax return, a violation of 26 U.S. Code § 7206(2) pertaining to fraud and false statements, aid or assistance. This offense is charged when an individual, often though not always an unscrupulous tax preparer, “Willfully aids or assists in, or procures, counsels, or advises the preparation or presentation… of a [tax] return… or other document, which is fraudulent or is false as to any material matter,” regardless of whether the fraud occurs “with the knowledge or consent of the person authorized or required to present [the] return.”
Goldberg – who “was aware that GCP paid many of Malkin’s personal expenses,” according to the DOJ – underreported Malkin’s income on various W-2 forms. In so doing, “GCP also improperly reduced the amount of Medicare Payroll Taxes it reported and paid to the IRS.” Over the period from 2003 to 2012, Goldberg underreported Medicare taxes by $40,490.
Generally speaking, U.S. employers are required to withhold Medicare and Social Security taxes (which are otherwise known as “FICA taxes” or “payroll taxes”) from employee wages. The withheld amounts must then be matched by employer and remitted to the IRS. Form W-2 prompts employers to supply information about employee compensation, the amount of Social Security tax withheld, and the amount of Medicare tax withheld, among other data. If the IRS detects gaps or discrepancies (or outright failures to file), an investigation or examination may be initiated, such as a federal employment tax audit.
Goldberg’s sentencing is currently scheduled to take place on November 29, 2018. Like his nephew, Goldberg will also be sentenced by Judge Hall. In accordance with the penalties authorized by the underlying statute, he may be sentenced to up to three years in prison.
Employers have a distinct set of responsibilities with regard to employment and payroll taxes. However, regardless of whether a taxpayer is an employer or an employee, he or she always has a duty to report his or her earnings truthfully, fully, and accurately. Failure to do so may lead to serious consequences, even if the taxpayer has no criminal history.
Whether you are concerned about the accuracy of your previous tax returns, need help getting caught up on back taxes, or have questions about your tax responsibilities as an employer or business owner, the Tax Law Office of David W. Klasing can help. We are an award-winning tax firm with extensive experience helping businesses and individuals prepare for tax audits, fight criminal charges, and achieve compliance with state and federal tax laws. To discuss your tax needs confidentially in a reduced-rate consultation, contact us online, or call the Tax Law Office of David W. Klasing at (800) 681-1295.
Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland and Sacramento.
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