Department of Justice Seeks to Shut Down Tax Return Scheme in Chicago, Reminds Taxpayers to Come Into Compliance While They Can

How attorneys should handle tax issues with their clients
How Attorneys Should Handle Tax Issues With Their Clients
June 11, 2020
Southern California couple may get jail time for tax fraud.
Southern California Couple Faces Prison After Pleading Guilty to Tax Charges, Wire Fraud
June 13, 2020

Department of Justice Seeks to Shut Down Tax Return Scheme in Chicago, Reminds Taxpayers to Come Into Compliance While They Can

Franchise Tax Board (FTB) Publishes List Naming California’s Top 500 Delinquent Taxpayers

According to a Department of Justice press release, a Chicago-area tax preparation business was in the crosshairs of the Department Justice, as the DOJ asked a federal court to permanently enjoin or “legally forbid” the firm from preparing tax returns for others in the future. As we move closer toward the new July 15th extended deadline to file individual and corporate tax returns it is critical to be aware of potential scams that could lead to headaches down the road. Additionally, if you have engaged in any techniques that are common among those trying to illegally lower their tax liability, there is a relatively small window of time to contact an experienced tax defense attorney and get right with the government before a large wave of audits begin.

Return Preparers Caused Client Returns to Understate Income and Inflate Deductions

Federal prosecutors recently filed a complaint in federal court against Patricia Rivers, her daughter-in-law, Ki’esha M. Gary, and Rivers’ business, Alpha II Omega Tax, asking the court to permanently shut down their tax preparation activities. According to a federal investigation, Rivers, Gary, and their business fraudulently prepared tax returns for clients, resulting in fraudulent refunds.

Investigators indicated that the tax preparation business prepared over 2,750 tax returns for clients. Fraudulent refunds were generally the result of the preparers understating income and overstating deductions generally only available to those who have their own business or were self-employed. A government investigation interviewed 38 individuals who had tax returns prepared by Rivers, Gary, or Alpha II Omega Tax. Of the 38 tax returns belonging to those interviewed, the government suffered an actual tax loss of over $278,000.

Identifying Your Own Tax Exposures and Correcting Them

Due to the COVID-19 pandemic, the tax return deadline for California and federal tax returns has been extended to July 15, 2020. Thus, there are likely a large number of individuals and businesses who have not yet completed their tax compliance for the 2019 tax year. It is important to not only take care in choosing who prepares your tax return, but also to watch out for common illegal tax strategies that you may have utilized in the past.

For instance, many taxpayers who complete their own tax return either omit certain amounts of income or overstate particular items of deduction. At the time, it may seem like a harmless fib. Many taxpayers believe that they will never get caught because they are simply a small fish in a big pond. Although there are millions of taxpayers in the United States, the IRS uses sophisticated automated software to weed out those who may have lied on their tax returns. If the IRS computer system notices that a tax return may be off, it is routed to an IRS employee for review. At that point, your risk of audit increases exponentially.

One way to mitigate a potential audit or criminal tax investigation is to get right with the government before they make contact with you. During the COVID-19 pandemic, the IRS has put most of their new examinations on hold and are only commencing new audits in relatively rare circumstances. This time window allows taxpayers to consult with an experienced tax attorney to determine their best option to come into tax compliance. Because a taxpayer should never go up against the IRS alone, your tax attorney will represent you in any correspondence or communication with the IRS, should such communication be necessary.

Note:  As long as a taxpayer that has willfully committed tax crimes self-reports the tax fraud (potentially including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax investigation/prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.

It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process.  Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.

Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.

As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs and EAs, our firm provides a one-stop-shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth.   See our Testimonials to see what our clients have to say about us!

See our Non-Filer Q and A Library

See our 2011 OVDI Q and A Library

See our FBAR Compliance and Disclosure Q and A Library 

See our Foreign Audit Q and A Library

We Are Here for You

Regardless of your particular 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.

Our office technology allows clients to meet virtually via GoToMeeting. With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced-rate initial consultation via GoToMeeting follow this link.   Call our office and request a GoToMeeting if you are an existing client.