Ex-Financial Planner Charged with Fraud, Failing to File Tax Returns

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Ex-Financial Planner Charged with Fraud, Failing to File Tax Returns

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The U.S. Department of Justice (DOJ) recently issued a press release announcing the arraignment of 49-year-old Florida resident James A. Young III, formerly a financial planner, on two counts of wire fraud (a violation of 18 U.S. Code § 1343) and three counts of failure to file a return (a violation of 26 U.S. Code § 7203), a form of tax fraud, for a total of five charges. In criminal law, the arraignment is the hearing, held early in the course of a criminal case, at which the defendant enters a plea of “guilty” or “not guilty” (or, in rare cases, “nolo contendere”). If a defendant pleads not guilty, he or she is entitled to a trial, which, in Young’s case, is currently scheduled to occur in Pensacola federal court on September 3, 2019. The indictment, or charging document, alleges that Young failed to file tax returns for the years 2012 through 2014, in addition to engaging in wire fraud by lying to investors and “soliciting his clients and others to invest money in false ‘side investments’” involving “real estate and natural resource rights.” If convicted, Young could face a maximum prison sentence of more than 20 years.

What is the Tax Crime of Willful Failure to File a Return?

The willful failure to file a tax return is charged and prosecuted under 26 U.S. Code § 7203 (IRC § 7203). According to the legal definition supplied by the statute, a person commits this offense when he or she willfully fails to submit timely income tax returns to the IRS. The following scenarios do not constitute willful failure to file a return:

  • Failing to file due to “reasonable cause,” existence of which is evaluated by the IRS on a case-by-case basis. Examples of situations the IRS might accept as constituting “reasonable cause” include:
    • Experiencing a natural disaster
    • Experiencing a serious medical emergency
    • The death or sudden illness of an immediate family member
  • Filing a truthful and accurate return after April 15 (but no later than October 15), provided the taxpayer obtained a deadline extension from the IRS.

In contrast to the above scenarios, willful failure to file is the intentional non-filing of one or more returns, done with the intent to avoid paying taxes. And, unlike the scenarios above, willful failure to file is a crime. Considered a form of tax evasion, willful non-filing is punishable by criminal fines of up to $25,000, which may be imposed in addition to or in place of a jail sentence of up to one year. Unlike most tax crimes – many of which, like tax evasion, are felonies – willfully failing to file is generally a misdemeanor offense, which can be ramped up to felony income tax evasion if any of the Spies Evasion factors are present.  If the charge is graded as a felony, the maximum prison sentence quintuples from one year to five years. The maximum prison sentence for wire fraud is generally 20 years, though in some cases a sentence as long as 30 years may be imposed, in addition to criminal fines of up to $1 million.

Unfiled Tax Return Lawyers Handling IRS Audits and Criminal Investigations

Every year, roughly one million taxpayers are selected for tax audits – many for failures to file returns. A taxpayer with unfiled returns can be audited by the IRS for up to six years or even longer, creating a dangerous situation in need of careful handling to limit criminal tax exposure.

If you have unfiled federal or California tax returns, you need dependable, strategy-driven guidance from a seasoned tax defense attorney, like David W. Klasing, founder of the Tax Law Office of David W. Klasing. Dually certified as an attorney-CPA in California, Mr. Klasing possesses more than 30 years of comprehensive IRS tax experience in civil and criminal matters, ensuring a well-rounded and detail-oriented approach to every case. Serving Northern and Southern California, our IRS tax attorneys fight tirelessly to mitigate the criminal penalties you may be facing, while simultaneously seeking methods to limit civil penalties and interest. Whether you have questions about filing back taxes, have been notified of an IRS audit, or are worried about a criminal tax investigation, we can provide the focused, driven representation you need. Contact us online today to arrange a reduced-rate consultation, 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 BernardinoSanta BarbaraPanorama CityOxnardSan DiegoBakersfieldSan Jose, San FranciscoOakland and Sacramento.

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