This past month, the owner of a commercial and residential construction business that had operated in Dracut, Massachusetts for over 20 years was sentenced to three years of probation, including a year of house arrest for his alleged tax evasion.
According to court documents, the government claimed Enwright made under-the-table cash payments to employees and concealed receipts from the federal government. Cash intensive businesses are red flags for the IRS, so you should expect serious scrutiny, even if you have been disclosing and paying your taxes correctly.
If you have concerns about a potential IRS audit or criminal tax investigation into your personal or small business’ compliance history, discuss them with the seasoned Dual Licensed Tax Lawyers and CPAs at the Tax Law Offices of David W. Klasing. The first step is to call our offices at (800) 681-1295 today or schedule a reduced rate initial consultation online today.
A man who owned a commercial and residential construction business in Dracut was sentenced in late March to probation, including a period of home arrest. This comes after the defendant, James P. Enwright, pled guilty earlier in the month to tax evasion and willful failure to pay taxes.
Enwright, 53, owned and operated Enwright Construction for over 20 years. Over the course of a five-year span between 2013 and 2018, Enwright was alleged to have withheld over $2.8 million of the business’ gross receipts from the knowledge of his tax preparer. During roughly this same period of time, Enwright made roughly $3 million in “under the table” cash payments to employees of the business, thereby underreporting the tax liability owed on the cash wages. Court documents allege that the totality of Enwright’s conduct caused a loss to the IRS of over $1 million during this time.
Enwright pled guilty to one count of tax evasion and one count of failure to pay over taxes. U.S. Senior District Court Judge George A. O’Toole, Jr. handed down a sentence of three years’ probation, with the first year to be spent under home incarceration. Enwright received no jail time despite the government’s recommendation to the court of two years in prison.
Just like any other criminal tax case that makes the news, we can take note of several key lessons from Enwright’s case. Not only can we use the IRS’ actions to predict future behavior, but we can also inform ourselves of what to do (and what not to do) if we ever find ourselves in a similar situation.
Many types of businesses conduct many of their transactions in cash, both on the revenue side as well as the payroll side. It is possible and reasonable that such a business is going about its tax liability reporting honestly and is entirely compliant. However, because the area is so ripe for mistakes and even willful evasion, the IRS will always pay closer attention to businesses that make significant use of cash in their dealings.
If your small business commonly uses cash, it is important to keep detailed records of all transactions and do your best to report honestly. Simply “guess-timating” is a bad idea since the government often gets suspicious of round numbers on a tax return. If you have made mistakes and engaged in intentional understatements like these in the past, you should reach out to a Dual Licensed Tax Attorney and CPA to help you review your records and prevent future government actions like audits or criminal tax investigations from impacting your small business.
If you have failed to file a tax return for one or more years or have taken a position on a tax return that could not be supported upon an IRS or state tax authority audit, eggshell audit, reverse eggshell audit, or criminal tax investigation, it is in your best interest to contact an experienced tax defense attorney to determine your best route back into federal or state tax compliance without facing criminal prosecution.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosurebefore 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, KovelCPAs 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!
One of the biggest mistakes that taxpayers make every year is assuming that they are free and in the clear because their noncompliance happened years ago and has not been discovered yet. However, this is rarely the case. The federal government has the newfound capability and motivation to go back into a taxpayer’s filing history to root out noncompliance. Further, if the IRS suspects noncompliance in one year, they will likely put the time in to examine all other years on file for the taxpaying individual or entity.
Another false assumption that taxpayers with noncompliant histories make is that they have no options to protect themselves from past mistakes other than hiding and hoping the issue isn’t noticed. In many cases, taxpayers have the ability to use the IRS’ voluntary disclosure program, which allows taxpayers to come clean and provide additional, clarifying documentation about their past tax status. Through voluntary disclosure, many taxpayers can reduce or even entirely avoid the penalties that they might face if the government discovers their noncompliance on their own.
Voluntary disclosure will not benefit everyone. In some cases, disclosing the specific type of noncompliance will not win the taxpayer any favor and might actually put them in a worse position. Voluntary disclosure may not be effective if the government is already aware of the noncompliance. Never attempt to amend your past tax filings through the voluntary disclosure program without the help of a Dual Licensed Tax Attorney and CPA.
Enwright pled guilty as part of an arrangement with the prosecution. Through a plea deal, criminal tax defendants can remove more serious charges or obtain lighter sentencing recommendations. However, in this case, it is plain to see that a sentencing recommendation is no more than a recommendation. The court is still free to penalize the defendant as they see fit. While this worked out better for Enwright, it is entirely possible that the court could have gone the other way and sentenced Enwright to more prison time than the prosecution even suggested. Discuss any plea deal offer with your Dual Licensed Tax Lawyer and CPA before accepting anything.
You can get the criminal tax law advice that your case requires when you need it by reaching out to the Dual Licensed Tax Attorneys and CPAs at the Tax Law Offices of David W. Klasing. Call our offices today at (800) 681-1295.