One of the major initiatives of the California Franchise Tax Board or FTB and Board of Equalization or BOE over the past few years has been lobbying the state policymakers to pass legislation that outlaws the ownership and operation of technology that is used to reduce the amount of taxable income recorded and reported to tax agencies. But it isn’t just businesses in California that are susceptible to being investigated for criminal tax conduct related to such illegal practices. A family from Wisconsin is experiencing the income tax enforcement power of the IRS first hand and will need the help of an experienced tax attorney in a hurry. If you own a small to medium sized business that is being investigated for using skimming, zappers, or similar technology, it may be in your best interest to seek the help of a tax attorney as soon as possible.
Paul Bouraxis (age 65), his wife Freida Bouraxis (age 60), their son, Andreas Bouraxis (age 38), and son-in-law, Reiad “Ray” Awadallah (age 44), all of the Franklin area of Wisconsin were charged last week on multiple counts that stem from the operation of several family restaurants located throughout the state. According to a Department of Justice press release, the family members were charged with a laundry list of crimes including tax evasion for intentionally cash skimming or taking some of the cash received from patrons of the Omega Burger in Franklin, El Beso in Greenfield, and El Fuego in Milwaukee.
Cash skimming is the process by which cash-based business owners reduce the amount of cash received on their books and reports sent to the IRS and state tax agencies in an effort to pay less income tax. Skimming has been going on for years but only recently has technology played a large part in the effort to defraud the government. Point of service systems can be implemented that automatically reduce the amount of cash received for record-keeping purposes. This will allow a business owner to effortlessly generate fraudulent tax documents. Further, the technology is often in the form of software installed on the computers of the business, allowing the process to work clandestinely without the knowledge of the front-line employee collecting the cash from the customer.
As we mentioned previously, the California legislature saw skimming and the technology behind it as major threat to the integrity of the income tax system in the state and enacted a law that criminalized the possession or use of skimming devices, known as zappers. But it isn’t just the California Franchise Tax Board or Board of Equalization that are on the lookout for the use of zapping technology. In the case featured in this posting, the IRS was the agency that audited and investigated the actions of the defendants and referred the case to the Department of Justice for prosecution.
The investigation uncovered that between 2007 and 2011, Bouraxis and his family had not only skimmed a significant amount of money off of the records of their several restaurants, but some family members who were in charge of the individual establishments were paying employees in cash and not withholding or paying employment taxes. In addition to the tax evasion charges, Paul Bouraxis was also charged with crimes related to banking fraud with respect to loans taken out at a local bank. He could face a total of up to 85 years in prison and fines of up to $3.75 million. His relatives that were charged in the case face a combined 38 years behind bars, as well.
If you are a small to medium sized business that deals with a substantial amount of cash, the government has its eyes on you. Revenue agents from both California and the IRS have specific methods of investigating and auditing cash-based businesses in order to uncover any improprieties. In fact, the IRS has its own audit manual for agents to use when dealing with cash-intensive businesses. Investigators at the state and federal level also have various methods of determining whether a businesses owner has been skimming. For instance, investigators frequently go undercover to observe the cash intake of a business. The investigator will determine roughly what percentage of the business’s sales are cash and will then compare that ratio to the ratio of reported 1099-K credit card sales to total sales to ensure that there are not large deviations
In any event, if one agency opens an investigation, you can bet that others will follow suit. If you are a cash-intensive business and are under audit or investigation for potentially skimming or using a zapper, the best thing that you can do for yourself and your business is contact an experienced tax attorney. The Tax Law Offices of David W. Klasing have represented taxpayers who have been under investigation for potentially using a zapper as well as a myriad of other tax crimes. Our understanding of the investigative methodology of the IRS Criminal Investigations Division and the California tax agencies will be of great help when we zealously advocate for your physical and financial freedom. We invite you to call 800-681-1295 or contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.